Företagsekonomiska Institutionen Department of Business ...632414/FULLTEXT01.pdf · Företagsekonomiska Institutionen Department of Business Studies HEALTHY BUSINESS FOR SMALL FIRMS

Företagsekonomiska Institutionen

Department of Business Studies

HEALTHY BUSINESS FOR SMALL FIRMS IN THE

REBIRTH OF A TRADITIONAL INDUSTRY

AN EXPLORATORY STUDY OF THE INFLUENTIAL FACTORS ON SWEDISH

MEDICAL SERVICE SMES INTERNATIONALIZATION PROCESS

Master thesis

Spring 2013

Authors: Malin Petersson & Alexander Runsbech

Supervisor: Katarina Hamberg Lagerström

Date of submission: 2013-05-31

I

ABSTRACT The healthcare service sector has recently entered the global arena and many nations sectors

has opened up for private initiatives, which is explained by the rapid development and

structural changes within the industry. However, regardless of considerable interest in the area

among academics, very little has been concluded in terms of investigating internationalization

of healthcare related services. The purpose of this study is to contribute with an enriched

understanding regarding how Swedish medical service SMEs internationalize and what

factors influence how - and in what way - the process unfolds. A conceptual model is

developed, extending the theoretical discussion by integrating established SME and

entrepreneurship literature with extant IB literature relevant for political salient industries.

Conducting an exploratory multiple case study, rich empirical data is collected and analyzed

in the light of the conceptual model. The research findings indicate that knowledge, networks,

and institutional factors influence how the internationalization process of medical service

SMEs unfolds to a large extent. The research contributes by concluding that the nature of the

service as well as the home market institutional context constitute pivotal influential factors

on the firms’ internationalization process and are added to the refined conceptual framework.

Keywords: SMEs; Healthcare Services; Internationalization Process; Networks; Knowledge; Institutional Context

II

ACKNOWLEDGEMENTS

It is with great pleasure we thank those who supported us throughout our research process resulting in this Master dissertation. We would like to express special thanks to our supervisor, Katarina Hamberg Lagerström, for continuous support, encouragement and guidance throughout the entire process.

We would also like to convey our greatest gratitude to all the interviewees and company representatives. We deeply appreciate the effort they made and the time they took to contribute with valuable insights and knowledge.

Finally we would like to thank the members of our seminar group and fellow students for valuable comments and feedback throughout the entire research process.

______________________________ ______________________________

Malin Petersson Alexander Runsbech

Uppsala 2013.05.31 Uppsala 2013.05.31

III

TABLE OF CONTENTS

1. INTRODUCTION 1

1.1 HEALTHCARE SERVICES: A GROWING OPPORTUNITY FOR SWEDISH EXPORT 1 1.2 PROBLEM DISCUSSION 2 1.3 RESEARCH PURPOSE AND CONTRIBUTION 3 1.4 THESIS DISPOSITION 4

2. LITERATURE REVIEW 5

2.1 INTRODUCING THE INTERNATIONALIZATION PROCESS OF SERVICE SMES 5 2.2 THE MAIN ELEMENTS WITHIN THE INTERNATIONALIZATION PROCESS: THE FIRST PART OF THE CONCEPTUAL MODEL 6 2.3 THE KEY INFLUENTIAL FACTORS ON THE MAIN ELEMENTS OF THE INTERNATIONALIZATION PROCESS: THE SECOND PART OF THE CONCEPTUAL FRAMEWORK 8 2.3.1 THE INFLUENCE OF KNOWLEDGE: AN EVOLVING LOGIC 10 2.3.2 THE INFLUENCE OF NETWORKS: AN EMERGENT LOGIC 12 2.3.3 THE INFLUENCE OF INSTITUTIONAL CONTEXT: A DEVELOPING LOGIC 14

3. RESEARCH DESIGN 18

3.1 RESEARCH APPROACH 18 3.1.1 MULTIPLE CASE STUDY STRATEGY 18 3.2 SELECTION OF CASE COMPANIES 19 3.3 DATA COLLECTION 21 3.3.1 PRIMARY DATA 21 3.3.2 SECONDARY DATA 22 3.4 DATA PRESENTATION & DATA ANALYSIS 22 3.4.1 DATA PRESENTATION 22 3.4.2 DATA ANALYSIS 23 3.5 QUALITY OF THE STUDY 23

4. EMPIRICAL CONTEXT: THE HEALTHCARE SERVICE INDUSTRY 25

4.1 HEALTHCARE SYSTEMS: ORGANIZATION AND FUNDING 25 4.1.1 FINANCING AND COVERAGE 25 4.1.2 REIMBURSEMENT: COMPENSATING THE PROVIDERS 26 4.1.3 PRIVATE-PUBLIC-PARTNERSHIP 27 4.2 THE SWEDISH HEALTHCARE SYSTEM 27 4.2.1 NEW REFORMS AND REGULATIONS 28 4.3 EXPORT OF SWEDISH HEALTHCARE 29

5. PRESENTATION OF CASE FINDINGS 30

5.1 SCANDINAVIAN CARE AB 30 5.1.1 RATIONALE BEHIND VENTURING INTERNATIONALLY 30 5.1.2 CONTINUED INTERNATIONAL ACTIVITY 30 5.2 SWEDISH CARE INTERNATIONAL 33 5.2.1 RATIONALE BEHIND VENTURING INTERNATIONALLY 33

IV

5.2.2 CONTINUED INTERNATIONAL ACTIVITY 34 5.3. GLOBAL HEALTH PARTNER 36 5.3.1 RATIONALE BEHIND VENTURING INTERNATIONALLY 36 5.3.2 CONTINUED INTERNATIONAL ACTIVITY 37 5.4 SUMMARY OF EMPIRICAL FINDINGS 40

6. ANALYSIS 41

6.1 TRIGGERS AND MOTIVES FOR INTERNATIONALIZATION 41 6.2 MARKET SELECTION 43 6.3 CHOICE OF ENTRY MODE 45

7. CONCLUSION 49

7.1 CONCLUDING REMARKS 49 7.2 ACADEMIC & PRACTICAL CONTRIBUTION 52 7.3 LIMITATIONS & SUGGESTIONS FOR FUTURE RESEARCH 53

LIST OF REFERENCES i

APPENDIX 1: INTERVIEW GUIDE Viii

LIST OF FIGURES & TABLES

FIGURE 1: Main elements within the internationalization process of the firm 7

FIGURE 2: The key influential factors & their influence on the internationalization process 9

FIGURE 3: The revised conceptual model 51

TABLE 1: Analytical case units: Overview of case companies 20

TABLE 2: Informants and interview process 22

TABLE 3: Summary of main empirical findings 40

Petersson. M & Runsbech. A

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1. INTRODUCTION

1.1 Healthcare Services: A Growing Opportunity for Swedish Export

The healthcare service sector has recently entered the global arena and the growth of the

international trading of such services has started to emerge (Venkatesh & Jayachandran,

2008). An explanation for this recent phenomenon can be attributed to the increasing

tendency among many advanced capitalist countries to privatize and contracting out welfare

services as a response to mounting health care expenditures stemming from societal cost

pressures (Mohan, 1991; Holden, 2005b; Outreville, 2007). Such forces have in turn urged

and paved the way for a number of New Public Management (NPM) reforms in the early

1990’s in a call to develop more market like conditions within the public sector (Anell et al.,

2012; Kamp & Hvid, 2012). Following this, many nations opened up their respective

healthcare sector for private initiatives, leading to a rising number of private actors entering

the hitherto closed sector (Anell et al., 2012; Vårdföretagarna, 2013). Consequently, this has

enabled previously regulated companies to cease upon opportunities to expand their

operations internationally (Holden, 2005b; Outreville, 2007), which has accelerated the

internationalization of the industry (Holden, 2005a; Holden, 2005b). In line with the global

phenomenon outlined above, Sweden’s healthcare system has become increasingly

deregulated during the last decade (Anell et al., 2012)

The healthcare sector, including medical services, constitutes the largest branch within the

classification of Swedish service companies (Vårdföretagarna, 2013). The private firms

within the segment are majorly (99,5%) small and medium sized enterprises (SMEs)

(Vårdföretagarna, 2013) as classified by OECD (2013) definition1. The ambition among these

firms to grow internationally and cease global opportunities’ is evident from the report

published by NUTEK in 2008, where 10 percent of the SMEs within the industry considered

establishment abroad within the nearest five years (NUTEK, 2008). According to the semi-

governmental foundation Swecare, the health care industry is considered to be one of the most

promising industries for the future growth of the Swedish economy (Swecare, 2012).

Moreover, in conjunction with the changing industry landscape and the increasing number of

international private markets (Munkhammar, 2010), new attractive opportunities to leverage

on Sweden’s prominent reputation within the industry for Sweden’s abundant small and 1 SMEs is made up of enterprises which employ up to 500 persons (OECD, 2013)


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medium sized healthcare service firms has presented themselves.

1.2 Problem Discussion Although the trend in healthcare is towards more open markets, healthcare is still amongst the

most heavily regulated sector of a nation’s economy, embedded in state structures at the

national level (Smith, 2004; Orava, 2005). The social importance of securing and providing

health services requires a high degree of government intervention compared to many other

sectors. Hence, the institutional context such as rules, laws and regulations, regarding for

instance standards of health care, foreign establishment, reimbursement systems and public

procurement have an extensive impact on healthcare related services, which varies greatly

between countries (Smith, 2004; Holden, 2005a). Furthermore, due to the high involvement of

public actors within the sector, it can be assumed that they play a critical role for

internationalizing firms. Thus, knowledge regarding institutional context, as well as

establishing network relationships with public actors and various government agencies, are

vital for firms aiming to venture abroad within the industry (De Sousa & Figueira de Lemos,

2009; Figueira de Lemos, 2013). However, how the institutional context and the political

environment influence the process remains a vital, yet understudied, aspect within the

discourse (Achtenhagen, 2011; Figueira de Lemos, 2013).

Moreover, regardless of considerable interest in the area of internationalization among

academics, very little has been concluded in terms of investigating the characteristics’

associated with internationalization of healthcare related services (Orava, 2001, 2005). Whilst

some sectors related to the delivery of health and social care are known to be highly

internationalized, such as pharmaceuticals or medical equipment, less is known about direct

service providers2 (Holden, 2005a; Munkhammar, 2010). This research gap has been

highlighted by authors such as Orava (2001), Holden (2003, 2005a) and Barnes et al. (2006)

who argue that the literature within the international business discourse is inadequate for a

profound understanding of internationalization of medical services.

Although some work has been done within the field, previous research have mostly been

centered on the national level of analysis regarding how private provisions influence the

global supply of healthcare activities, or internationalization among large healthcare

corporations and impacts on FDI on the host country nation (see Hall, 2001; Holden, 2003, 2 Providers or health related services include direct providers of health and social care services to the end consumer as well as suppliers of services to states and/or private providers. Examples of the former may include acute health care, elderly care, general clinics or specialist services. Examples of the latter may include ancillary services such as management services (e.g. of hospitals) consultancy and educational services (Holden, 2005b).


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2005a, 2005b; Smith, 2004; Outreville, 2007). With the exception of Orava’s (2001, 2005)

and Barnes et al.’s (2006) research, studies that undertakes a firm-level approach seems to be

scarce. According to Smith (2004) the lack of empirical data within this field can be explained

by the rapid development and structural changes, which has opened up for private

participation within the sector. Based on the reasoning above, we argue that further research

needs to be conducted within this field, thus the following research question constitutes the

focus of this study; How does Swedish SME medical service providers internationalize? What

factors influence how – and in what way – the process unfolds?

1.3 Research Purpose and Contribution Based on the discussion outlined in the background, the purpose of this study is to contribute

to an enriched understanding regarding how the internationalization process of Swedish small

and medium sized medical service firms evolve.

Having a better understanding of how SME medical service providers internationalize and

which factors influences the process will constitute vital contribution to both academia and

practitioners. In terms of empirical contribution, this study contributes to extant international

business (IB) research on the internationalization process of SMEs by exploring a unique and

newly emerged empirical context. Moreover, the study contributes to an deepened

understanding of how institutions matter for the firms’ internationalization process within a

political salient and heavily regulated industry by entailing insights from both developed and

developing markets, in which the institutional framework differs. Furthermore, this study

makes a theoretical contribution by developing a conceptual model, which extends the

theoretical discussion regarding the internationalization process of SMEs through integrating

established SME and entrepreneurship literature with extant IB literature relevant for political

salient industries. In terms of practical contribution the identified challenges and hinders

experienced by the Swedish medical service SMEs will constitute valuable information for

business support organizations as well as governmental commerce departments in their quest

for providing assistance for such firms operating in the rapidly emerging medical service

industry. In addition, the study discloses important managerial implications in terms of

important aspects of how SMEs internationalize within the politically salient industry and the

factors that influences the process, by identifying barriers as well as important considerations

to overcome such.


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1.4 Thesis Disposition The first chapter has introduced the research background and discussed the identified research

gap before presenting the purpose of paper and the stipulated research questions. The second

chapter presents a literature review, from which a conceptual model is developed. The

underlying methodological considerations of the paper is further presented and discussed in

chapter three. An empirical context is outlined in the fourth chapter before the presentation of

the empirical findings in chapter five. The sixth chapter outlines the analysis of the empirical

findings and seventh chapter concludes the paper by presenting the revised conceptual

framework, discusses the study’s contributions and limitations, and provides suggestions for

further research.


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2. LITERATURE REVIEW

2.1 Introducing the Internationalization process of service SMEs The phenomenon of internationalization has engendered a rich amount of research, including

a wide variety of perspectives. This study undertakes a view in line with the international

process perspective, as the present research seeks to advance the knowledge of how the

process unfolds and how key factors influence the process – aspects which constitute focal

points within the process view discourse (Johanson-&-Vahlne, 1990; Melin, 1992; Welch-&-

Luostarinen, 1988). Most scholars have described internationalization as the outward

movement in a firms international operation (Turnbull, 1987). However, a single universally

accepted definition of the term remains elusive (Andersen, 1997; Coviello-&-McAuley,

1999). Given the stated approach to internationalization, the study adheres to the definition

given by Welch and Luostarinen (1988), which define internationalization as “the process of

increasing involvement in international operations across borders” (Welch-&-Luostarinen,

1988:36). In the following section the internationalization process of service SMEs is in

focus.

The interest for studying SMEs internationalization has sharply increased in recent years in

parallel with their amplified tendency to take advantage of the enabling forces of globalization

and expand across borders (O’Farrell-&-Wood, 1994; Morgan-&-Katsekias, 1997; Barringer-

&-Greenwhich, 1998; Hutchinson-et-al., 2005; Lee-et-al., 2012). However, given the size-

related vulnerability of SMEs, the stakes of venturing internationally are high compared to

larger firms (Hutchinson-et-al., 2005; Lee-et-al., 2012). Due to the unique difference in

ownership and operating characteristics, as well as size related issues, such as financial and

human resource constraints, smaller firms interact differently with their environment, which

impact strategy, and consequently the outcome of its internationalization (Lu-&-Beamish,

2001; Hutchinson-et-al., 2005). Hence, frameworks developed to explain larger firms

internationalization process cannot be directly applied to smaller firms (ibid).

In addition, the trade impediments, including regulatory and preferential requirements, are

more diverse in the trade of services in comparison with products (O’Farrell-&-Wood, 1994).

In regards to market selection, literature has suggested that following customers overseas has

been particularly emphasized in service firms (Erramilli, 1990). In addition, O’Farrell-&-

Wood (1994) argues that the choice of market for service firms operating on project basis

becomes determined as a by-product of the contract. Moreover, literature reveals that FDI as a


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mode of entry for service firms is more commonly employed in comparison to non-equity

arrangements (O’Farrell & Wood, 1994; Malhotra & Hinings, 2010). Given the intangibility

of services, where value and knowledge is generated in the delivery and execution, it is

difficult to separate such from the provider through export (O’Farrell-&-Wood, 1994).

2.2 The Main Elements within the Internationalization Process: The first part of the Conceptual Model We address the knowledge gap on medical service SMEs internationalization process by

presenting a conceptual framework developed from, and based on, broader established SME

internationalization process literature. In the following section the rationale behind the first

part of the model will be presented.

Research within international business incorporates four key aspects, which are highlighted as

main elements within the internationalization process and are thus chosen as core factors in

the model. These factors are (1) motives and triggers for internationalization, referring to all

factors, which influence firms’ decisions to initiate, develop and sustain their international

activities (Leonidou, 1995). The fundamental reason for internationalization in most firms is

to enhance their profitability and consequently their survival (Crick-&-Spence, 2005;

Hollensen, 2007). However, one factor alone seldom accounts for any given action. Thus, the

phenomenon has urged a widespread stream of research and constitutes a vital element in the

internationalization processes of the firm (Morgan-&-Katsikeas, 1997). (2) The international

market selection (IMS) process constitute a second vital factor, which entails firms’

identification and selection of which market(s) to enter and in which order (O’Farrell-&-

Wood, 1994; Andersson, 2004; Hollensen, 2007). Parts of the IB literature streams embrace a

rational approach towards IMS decisions, where the selection is made on the basis of

objective information gathered systematically via market research. However, studies have

shown that firms rarely follow this in practice (Ellis, 2000; Hollensen, 2007). Various

empirical studies instead indicate that market selection decisions are often made ad hoc, for

“non-rational” reasons that defy the optimizing logic of the market. Proponents of the process

based literature stream often adhere to this viewpoint in term of firm’s internationalization

process (Ellis, 2000; Johanson-&-Vahlne, 1977). Either way, the element is an important part

of the firms’ internationalization process as the selection can potentially be a major

determinant of a firm’s success and failure (O’Farrell-&-Wood, 1994; Andersson, 2004).

Often closely related to, and interrelated with, market selection is (3) the choice of entry

mode, which the IB literature highlights as a frontier-issue in conjunction with firms


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internationalization (Erramilli-&-Rao, 1993; O’Farrell-&-Wood, 1994; Malhotra-&-Hinings,

2010; Ripollés-et-al., 2012). As a firm internationalizes it faces complex choices among

numerous forms of institutional arrangements such as wholly owned subsidiaries, joint

ventures and non-equity arrangements, such as licensing and management contracts

(Malhotra-&-Hinings, 2010). Each of these forms relates to diverse levels of investment in

committed assets in foreign markets, tangible and intangible, and thus constitutes a vital

aspect of an internationalization process (ibid.). A fourth element, which has been extensively

highlighted as critical elements in firms internationalization constitutes (4) barriers and

hinders, which surrounds the internationalization path. Barriers refer to “all those constraints

that hinders the firm’s ability to initiate, develop, or to sustain business operations in

overseas markets” (Leonidou, 2004:281). These hinders can be of different origin; however a

common classification is usually done between internal and external, where the former stems

from the firms resources and capabilities, such as lack of financial resources and foreign

market knowledge, while the latter originates in the environment of the domestic and/or

foreign markets, such as cultural and political impediment (Bell, 1997; Morgan-&-Katsikeas,

1997; Leonidou, 2004; Hollensen, 2007). The following image illustrates the four main

elements within the internationalization process of the firm, as depicted in this thesis, and

constitutes the first part of the conceptual framework.

Fig 1.Main elements within the internationalization process of the firm (authors own)


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2.3 The Key Influential Factors on the Main Elements of the Internationalization Process: The Second part of the Conceptual Framework The concepts of knowledge, network and institutional context have been emphasized in the

literature as key aspects, which influence the elements of the internationalization process

described above.

Learning and knowledge has been widely recognized as a vital factor in conjunction with

firms’ internationalization (Forsgren, 2002; Ruzzier-et-al., 2006; Johanson-&-Vahlne, 2009;

Achtenhagen, 2011). Much of the extant IB process literature and research on SMEs

internationalization is inspired by the seminal work of Johanson and Vahlnes Uppsala model,

which highlights learning and knowledge as key mechanisms of firms’ internationalization.

Moreover, as SMEs are commonly led by the owner and where top management is a shared

effort, the importance of the entrepreneur and top management should also be recognized as a

vital variable in SMEs internationalization (Crick-&-Spence, 2005; Suárez-Ortega-&-Álamo-

Vera, 2005; Chetty-&-Campbell-Hunt, 2003). However, this fact seems to be neglected in

most process-oriented research (Ruzzier et al., 2006). Hence, the conceptual framework

integrates research conducted in the field of international entrepreneurship, which among

other things illustrates the link between the firms international development and the influence

of the individual entrepreneurs accumulated knowledge and experience (McDougall-&-

Oviatt, 2000; Shane, 2000; Crick, 2009). Moreover, recognized both in the international

entrepreneurship literature and in the later work of Johanson and Vahlne (see 1992, 2003,

2006, 2009), is the heightening importance of networks in conjunction with firms

internationalization processes. Several studies (Coviello & Munro, 1995; Lu & Beamish,

2001; Achtenhagen, 2011; Ibeh & Kasem, 2011) have highlighted the significance of

networks in relation to SMEs internationalization, whose development tend to be dependent

on relationships in order to overcome, resource-, experience-, and market knowledge

limitations. Thus, the concept of network constitutes the second key factor in the conceptual

model. Lastly, as healthcare firms are operating within a highly regulated and political salient

industry, the conceptual framework adds the institutional context and particularly, the

political elements of the environment. Although recognized in the extant IB research, the

influence of the institutional context and the role of the government in the internationalization

process have been somewhat overlooked (Peng-et-al., 2008; Figueira-de-Lemos, 2013).

Hence, the conceptual framework integrates ideas and concepts from institutionalism studies,

which advocates the inclusion of institutional and political elements as a part of firms’

internationalization.


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Based upon above reasoning, the following conceptual model has been developed in order to

depict the key factors influence on the main elements of the internationalization process.

Figure 2. The key influential factors & their influence on the internationalization process (authors own)

The model follows a sequential structure according to the process view of internationalization,

where triggers and motives precedes the continued internationalization process in which

market selection commonly precedes the choice of entry mode. However, the interaction

between the variables and the influences from hinder and barriers as well as knowledge,

networks and the institutional context, might alter the sequence of the process3. The same

factors will also impact upon the subsequent internationalization process, through

accumulated experiences, knowledge and networks.

In the following section the key influential factors of the model and their influence on the

main elements of the internationalization process will be further elaborated upon.

3 It should be acknowledged that the key influential factors are interrelated and consequently affect each other. However, the purpose of the study is not to explore their interaction between each other but rather their influence on the process.


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2.3.1 The influence of Knowledge: An Evolving Logic Behavioral models describing the process of internationalization emphasize the impact of

knowledge on a firm’s internationalization (Forsgren, 2002). The Uppsala model draws upon

studies describing the internationalization as a series of incremental decisions, in which firms

successively enhance their market knowledge, through gradual accumulation and integration

of experience in the market, in order to increase their international commitment (Johansson-

&-Wiedersheim-Paul, 1975; Johansson-&-Vahlne, 1977, 1990). The main source of market

knowledge thus stems from the firms operations in the specific market. Due to the tacit nature

of such knowledge it differs from more objective internationalization knowledge, as it can

only be acquired through personal experience (Johanson-&-Vahlne, 1977, 1990, 2009;

Forsgren, 2002; Andersson, 2004). By incrementally committing resources through a chain of

establishment, ranging from low-resource commitment modes such as export, to high

resource commitment modes such as wholly owned subsidiaries, firms can gradually

accumulate experiential knowledge in order to reduce the barrier of uncertainty (ibid). Hence,

experiential knowledge drives the internationalization process (Johansson-&-Vahlne, 2009).

The notion of psychic distance has been introduced, defined as “the sum of factors preventing

the flow of information from and to the market” (Johanson-&-Vahlne, 1977:24), which refers

to differences in institutional, economic, and cultural factors, which acts as barriers to

internationalization (Johanson-&-Vahlne, 2009). Hence, psychic distance influences the

selection of foreign markets, where markets with low psychic distance require less

experiential knowledge, and are thus favored. Similarly, psychic distance influences mode of

entry, as markets with greater psychic distance corresponds to greater uncertainty, which

reduces the resource commitment (Johanson-&-Wiedersheim-Paul, 1975; Johanson-&-

Vahlne, 1977, 1990).

However, several authors (Forsgren, 2002; Andersson, 2004; Malhotra-&-Hinings, 2010)

argue that it is too narrow to assume that experiential knowledge is the main moderator of

market uncertainty. More recent literature (Oviatt-&-McDougall, 1994, 2005; Forsgren, 2002;

Andersson, 2004; Malhotra-&-Hinings, 2010) has challenged the traditional stage models by

highlighting that there exists other ways to acquire vital knowledge than through the time-

consuming incremental process, and other types of knowledge than experiential knowledge.

For instance, Johanson and Vahlne (2009) have, in their revisited model, acknowledged that

more general internationalization knowledge is important in addition to market specific. In

addition, Forsgren (2002) argues that there are other forms of knowledge than that stemming


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exclusively from experience, such as knowledge acquired through imitation, network

relationships and incorporation of people. Oviatt & McDougall (1994) builds on such

reasoning by arguing that an increasing amount of firms tend to deviate from the traditional

pattern of internationalization and states that the process unfolds much more rapidly now, as

other sources of knowledge have become accessible. International New Ventures (INV) are

examples of such firms and are defined as “business organizations that, from inception, seek

to derive significant competitive advantage from the use of resources and the sale of outputs

in multiple countries” (Oviatt-&-McDougall, 1994:470). As these firms are commonly size-

constrained, it has been argued that they will favor relatively low commitment entry modes in

order to overcome barriers such as lack of institutional knowledge and resources (Coviello-&-

Munro, 1997; Ripollés-et-al., 2012). However, contrastingly, Ripollés et al.’s (2012) research

explains that the firms international market orientation, derived from an early international

entry in conjunction with an entrepreneurial orientation to constantly scan and monitor

foreign markets, has a positive influence on the firms resource commitment (ibid). Hence, in

addition to experiential knowledge, the accumulation of foreign market knowledge developed

in a non-incremental manner is important to consider, as it can accelerate the

internationalization process through leap-frogging modes of entry in the establishment chain

(Malhotra-&-Hinings, 2010; Ripollés-et-al., 2012).

Furthermore, entrepreneurship literature emphasizes the entrepreneur as an important source

of knowledge in SMEs and discusses how knowledge stemming from the entrepreneurs

previous experience in foreign markets reduces uncertainties and makes business

opportunities visible (Eriksson-et-al., 1997; Suárez-Ortega-&-Álamo-Vera, 2005; Lindstrand-

et-al., 2011). Several authors (Crick-&-Spence, 2005; Suárez-Ortega-&-Álamo-Vera, 2005;

Achtenhagen, 2011) argues that owners and managers prior occupations in for example

exporting companies or membership in trade and professional associations reinforces the

decision makers’ knowledge and openness towards evaluating foreign markets, thus

influencing the initiation or expansion of international activities. In line with Johanson and

Vahlne’s (2009) emphasis on internationalization as contingent on developing and exploiting

emerging opportunities in their revised model, the entrepreneurship literature extends the

previous neglected aspects of opportunity development and detection. The entrepreneurs’

behavioral characteristics, in combination with previous knowledge and experiences, are

emphasized as explanatory variables for opportunity detection in SMEs (Johanson-&-Vahlne,


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2009; Ripollés-et-al., 2012). Such variables also influence the perceived psychic distance, and

consequently, the firms market selection and choice of entry mode.

As psychic distance or experiential knowledge no longer fully describes a firm’s market

selection or entry mode, a new of field of research has emerged, which highlights the

importance of networks (Ruzzier-et-al., 2006; Jansson-&-Sandberg, 2008).

2.3.2 The influence of Networks: An Emergent Logic The importance of network relationships on SMEs internationalization processes has been

widely recognized (Coviello-&-Munro, 1995, 1997; Coviello-&-Martin, 1999; Lu-&-

Beamish, 2001; Johanson-&-Vahlne, 2003; Achtenhagen, 2011; Ibeh-&-Kasem, 2011; Zain-

&-Ng, 2006). Firms’ networks incorporate both formal (e.g. customers, suppliers and

government) and informal (e.g. family and friends) relationships (ibid). Moreover, several

scholars (Ellis & Pecotich, 2001; Oviatt & McDougall, 2005; Ojala, 2009) have highlighted

the importance of intermediary relationships for SMEs development. In intermediary

relationships, there is no direct contact between the parties, but a third actor, facilitates the

establishment of the relationships between the players. In the revised Uppsala model, the

notion concerning firms’ dependency on resources controlled by other actors are highlighted,

and that firms can access these resources through their network position (Johanson-&-Vahlne,

2009). Hence, internationalization is viewed as the outcome of firm actions to develop and

establish relationships and thus strengthening its network positions (Coviello-&-Munro, 1997;

Coviello-&-McAuley, 1999). Due to relationship-dependence and interconnectivity, the firms

internationalization process emerges as a pattern of behaviors influenced by a range of

business relationships with actors in its current markets, both domestic and international

(Coviello-&-Munro, 1997; Coviello-&-McAuley, 1999; Johanson-&-Vahlne, 2006, 2009).

Since networks in one country may extend far beyond country borders, opportunities arises as

firms can leverage on its relationship in a domestic network and use it as a bridge to other

networks in other countries (Johanson-&-Mattson, 1988; Coviello-&-Munro, 1997)

Consequently, the traditional managerial problems associated with foreign market venture,

such as overcoming liability of foreignness (e.g. psychic distance) are of less importance

(Coviello-et-al., 1998). Instead, the focus is towards network insider or outsidership

(Johanson-&-Vahlne, 2009). According to Johanson and Vahlne (2003, 2009) a firm’s

success requires that it is well established in one or more relevant networks, also referred to as

a network insider. Moreover, if a firm aspires to enter a foreign market where it currently has


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no relevant network position it will suffer from a liability of outsidership. This constitute a

vital challenge for the entering firm, which has to identify relevant market actors in order to

determine how they are interconnected (Johanson-&-Vahlne, 2009). This is a complex

procedure as business relationships are subtle phenomena, which cannot be easily observed by

an outsider. Moreover, an additional critical issue in conjunction to foreign market entry is

that building relationships is a costly, time-consuming and uncertain process (Johanson-&-

Vahlne, 2006). When trying to develop and establish relationships, it is assumed that

foreignness may complicate the process (Johanson-&-Vahlne, 2009). As noted by Johanson

and Vahlne (2009:1414) “the larger the psychic distance, other things being equal, the more

difficult it is to build new relationships”. In that sense psychic distance still influences the

internationalization process. However, the relationship between market entry and psychic

distance applies at the level of the decision maker, not the firm (ibid).

Moreover, networks have been found to act as catalysts for international expansion

(Johanson-&-Vahlne, 1990). Research has shown that network relationships triggers

knowledge opportunities and motivates firms to enter international markets (Johanson-&-

Vahlne, 1990; Ellis, 2000; Chetty-&-Patterson, 2002; Zain-&-Ng, 2006). The

founders/managers personal networks have shown to facilitate the identification of business

opportunities, thus acting as a triggering factor for SMEs internationalization (McDougall-et-

al., 1994; Crick-&-Spence, 2005; Achtenhagen, 2011; Lindstrand-et-al., 2011). Based on this

notion, Ellis (2000) argues that knowledge of foreign market opportunities is reliant upon the

idiosyncratic benefits of each individual’s social network.

Furthermore, Chetty and Patterson’s (2002) research findings reveal that export promotion

organizations and industry group networks have a triggering effect, influencing firms’

internationalization in terms of overcoming limited knowledge and experience of

internationalization. Hence, export promotion agencies and policies, as well as related

networks, are also crucial drivers for SMEs internationalization (Morgan-&-Katsikeas, 1997;

Chetty-&-Patterson, 2002; Crick-&-Spence, 2005).

As formal and informal network relationships generates possibilities to identify and exploit

opportunities, scholars argue that they will have a considerable impact on the particular

geographic market a firm decides to enter, as well as which entry mode to use (Bell, 1995;

Coviello-&-Munro, 1997; Johanson & Vahlne, 2003, 2009). Specifically, Coviello and

Munro’s (1997) research revealed that each firm’s internationalization process was clearly


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influenced by their partners and their networks, which guided foreign market selection and

provided the mechanism for market entry mode. Additionally, Ojala’s (2009) research

highlights intermediary relationship with export commissions as critical for SMEs that does

not have any formal or informal relationships they can use for market entry. Hence, these

actors act as brokers for establishing necessary contacts in a given market, and are thus vital

for firm’s internationalization.

Based on the above reasoning, several authors have highlighted that opportunities in

international business are becoming less a matter of country specificity, and more about

network specificity (Johansson-&-Mattson, 1988; Johanson-&-Vahlne, 2009, 2006).

However, Ojala’s (2009) research suggest that networks does not suffice to explain certain

market selections or modes of entry by contradicting the assumption that network seen as

determinants, or initiators, for SMEs internationalization into distant markets. Ojala (2009)

builds on Oviatt & McDougall’s (1994) research conducted related to opportunity seeking

behavior of early internationalizing firms, by arguing that such network relationships are

relevant when internationalizing to close markets, but other explanations are required in order

to understand SMEs internationalization to distant markets. The findings revealed that SMEs

initiatives to enter distant markets are more likely to select target market based on a strategic

decision, such as market size or market potential, rather than being influenced by a network

relationship or despite lacking a network (Ojala, 2009). Similarly, the choice of entry mode

might be determined on the basis of service requirements and strategy for implementation, as

such are emphasized as crucial aspects to consider in SMEs (Sharma & Blomstermo, 2003;

Ojala, 2009). Hence, in accordance with Oviatt & McDougall’s (1994) research, SMEs are

argued to proactively seek opportunities to venture to distant markets early in their

internationalization, instead of reacting to initiations stemming from the network relations

(Ojala, 2009).

While networks and relationships in IB literature have been explored extensively, an

important, yet understudied, phenomenon within the discourse is the interplay between the

political institutions and business actors (Hadjikhani-&-Håkansson, 1996; Hadjikhani-&-

Ghauri, 2001; Hadjikhani-et-al., 2008).

2.3.3 The influence of Institutional Context: A Developing Logic Institutions are commonly referred to as the “rules of the game” incorporating both informal

institutions (e.g. culture and ethical norms), which underpin formal institutions (e.g. laws and


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regulations) (Peng-et-al., 2008). Within the institutional context, governments and other

related power branches provide a framework of rules and regulations, which private firms are

deemed to follow (Welch-&-Wilkinson, 2004; Figueira-de-Lemos, 2013). Scholars (Delios-

&-Henisz, 2003; Peng-el-al., 2008, 2009; Figueira-de-Lemos, 2013) argue that the inclusion

of the political dimension in the internationalization process should always be considered, as

the government has a discretionary power over other factors influencing firms’

internationalization by being able to alter the environment almost instantly. The political

element becomes further illuminated in relation to political salient industries because of its

widespread impact on these firms’ commercial activities (Garcia-Canal-&-Guillén, 2008).

Political salient industries, such as health care, which often have had a long history of being

publicly owned, possess a greater probability of government involvement, as society expects

that the business owner and operator of the industry will balance private and public objectives

(Henisz, 2003; Holden, 2003; Garcia-Canal-&-Guillén, 2008). Moreover, political salient

industries are exposed to a multifaceted institutional environment, which includes a wide

array of regulations such as service standards, service requirements, licenses and

accreditation, which actors needs to consider (Welch-&-Wilkinson, 2004; Garcia-Canal-&-

Guillén, 2008). As the political institutions have an ideological dimension, the framework can

change when new political and societal values becomes embodied in altered rules and

regulations, thus further causing uncertainty (Welch-&-Wilkinson, 2004; Garcia-Canal-&-

Guillén, 2008). As such ideologies differ across nations, so too does the closely integrated

political institutional environments, which differs particularly between developed and

emerging economies (Peng-et-al., 2008). Due to their undergoing transformation, emerging

markets are characterized by a higher degree of market instability and turbulence in

comparison to developed economies, which presents significant barriers to entering firms

(Jansson, 2007). These barriers can reveal themselves through political risks, prevalence of

corruption and expropriation of funds (Knight & Cavusgil, 2004; Jansson, 2007). Thus, firms

within a political salient industry face considerable challenges when venturing abroad in

general, and to emerging markets in particular. Several authors (Henisz-&-Delios, 2001;

Delios-&-Henisz, 2003; Figueira-de-Lemos, 2013) have highlighted that the institutional

context and the political environment will influence how the firms’ internationalization

process unfold.

As several political salient industries have undergone considerable deregulations, Garcia-

Canal and Guillén’s (2008) research indicates that privatization offers opportunities to enter


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foreign markets, hence triggering the initiation to internationalize. Where these opportunities

arise depends on the countries degree of deregulation and its specific institutional

circumstances, which varies between countries, thus influencing the firms’ international

market selection (ibid). Moreover, other research findings shows that the level of political

instability affects the choice of markets, where a higher degree of policy uncertainty

negatively influences, or even deter, market entry (Henisz, 2003). Political instability refers to

the probability that governments alter the “rules of the game”, which might have negative

implications upon the entry firms interests (Henisz, 2003; Garcia-Canal-&-Guillén, 2008).

Furthermore, Garcia-Canal and Guillén (2008) findings suggest that firms’ international

experience of politically unstable markets will affect the firms’ choice of market selection. As

firms will be exposed to different levels of political instability, their criteria for market

selection will be revised, and their tolerance for policy risk will be reduced (ibid).

However, other research suggests that if the firms have generated a sufficient level of

institutional knowledge in order to negotiate favorable treatment they may still consider

expanding into politically unstable markets (Garcia-Canal-&-Guillén, 2008). In this regard,

having direct access to government officials or other political actors is considered of high

value in order to establish relationships and agreements (ibid). This resembles Hadjikhani et

al.’s (2012) argument that the only way to manage the political risk is to interact with the

political community. Moreover, Hadjikhani & Ghauri (2001) argues that relationships with

domestic associations as well as host country embassies are especially important in regards to

political salient industries, which can act as legitimate intermediaries for firms in order to

establish necessary relationships with the political community in the host country.

The notion of political instability, mentioned above, also impacts the firms’ choice of entry

mode. According to Delios & Henisz’s (2003) research, uncertainty stemming from the public

policy environment amplifies the hardship of collecting, interpreting and organizing necessary

information in order to make a high resource commitment. In addition, if uncertainty about a

culture and the policy environment are high, a significant amount of learning is required,

hence reducing the likelihood of high resource entry mode (Delios & Henisz, 2003). This is

particularly relevant to SMEs, as Maekelburger et al. (2012) argues that these firms are

generally sensitive to external influences. As the resource constrains also limits error margins,

resource commitment of ‘non-redeployable’ investments to a single specific market involves a

higher degree of risk, making the consequences of failure more costly (ibid). Hence, if the

institutional environment is characterized by volatility and uncertainty, such fact strongly


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influences the choice of entry mode by SMEs (ibid). Nevertheless, Garcia-Canal and Guillén

(2008) claims that the nature of regulated industries requires a strong commitment of

resources, thus contradicting the traditional incremental theories. This is due to the often strict

regulations placed on licenses by the government, and the commonly partly owned

governmental industry, which requires commitment in order to seize opportunities when they

arise (ibid).

Furthermore, Smith (2004) and Henisz (2003) states that it is common for firms within

political salient industries to embrace a joint venture with local partners, as they possess a

fundamental understanding of the political system, and necessary connections, in order to

manage political uncertainty. Smiths (2004) review of literature concerning FDI and trade in

health services, argues that most foreign firms find it risky to invest in emerging markets,

which further requires a local partner with an understanding of the local culture and political

policies.


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3. RESEARCH DESIGN

3.1 Research Approach An exploratory style of study has been conducted given the contemporary phenomena of

internationalizing SMEs within the healthcare sector (Holden, 2005a), and consequently the

limited research (Holden, 2005b; Orava, 2005). This style enables an open approach that

allows for research to be conducted within a new field without extensive previous knowledge

of the phenomenon (Eisenhardt, 1989; Saunders et al., 2009). Although knowledge

concerning internationalization of SMEs within various IB literature should be acknowledged,

the deviant and unique contextual setting of the heavily regulated institutional healthcare

sector emphasizes the requirement of an exploratory approach as opposed to more theory

testing and less open style of research. The exploratory approach allows for both the

application and testing of existing theory in a new context, as well as extending and

developing alternative explanations or theory beyond those stipulated by the theoretical

framework, which emerges out of relationships derived from empirical descriptions of a

particular phenomenon (cf Bryman & Bell, 2007; Eisenhardt & Graebner, 2007; Saunders et

al., 2009).

Furthermore, a qualitative research approach has been selected and employed in order to

further portray the deviant contextual setting in which our study takes place, reflecting the

purpose of this study – to gain a holistic understanding of a new phenomena (cf Merriam,

2010; Yin, 2011). Yin (2011) argues that qualitative research allows for the inclusion of the

contextual conditions, such as the social, institutional, and environmental conditions, which

this study aims to depict, and which other research methods fail to address. Thus, the decision

to conduct a qualitative research can be further supported by its ability to examine and

interpret the close connection to empirical reality in which the units interact that permits the

development of relevant and valid theory (cf Bryman & Bell, 2007; Eisenhardt, 1989).

3.1.1 Multiple Case study Strategy A multiple case study strategy has been chosen as it is considered particularly appropriate

when addressing the issue of lacking adequate empirical substantiation concerning a specific

unexplored phenomenon (cf Eisenhardt, 1989; Yin, 2003). It can also be argued that a case

study is appropriate when studying a contemporary phenomenon embedded in its context

(Merriam, 2010), and where “the boundaries between phenomenon and context are not

clearly evident” (Yin, 1981:59). Moreover, the contextual richness of a case approach enables

”identification of actors, processes and political institutions” (Yin, 1994:56) and thus far too


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complex to study with quantitative research methods (Yin, 2003). As the unit of analysis in

this study is the process of internationalization, a multiple case study becomes further

appropriate as it allows for obtaining empirical evidence providing contemporary descriptions

of a specific occurring process (cf Bryman & Bell, 2007; Eisenhardt & Graebner, 2007).

Furthermore, considering our intent of contributing to existing IB research by extending

emergent theory, a multiple case study is suitable as it increases the level of robustness and

accuracy of the independently emerged analytical conclusions (cf Yin, 2003; Eisenhardt &

Graebner, 2007; Saunders et al., 2009). It has been argued that multiple cases enhances the

thoroughness of the study and strengthens the empirical foundation on which the analytical

conclusions are made (Eisenhardt, 1989) due to the deep grounding in varied empirical

evidence (Eisenhardt & Graebner, 2007). Such allows for a deeper analysis of the chosen

units and enables a stronger base for the formation of new theoretical constructs (Yin, 1994).

3.2 Selection of Case Companies In order to further explore our unit of analysis – the internationalization process – the

following criterion has been stipulated in order to determine the analytical units;

(1) A direct service provider to end consumer and/or suppliers of healthcare services to

state and/or private actors within the healthcare industry – chosen due to the lack of

research conducted within the internationalization of healthcare service providers.

(2) Of Swedish origin, determined by having its headquarters situated in Sweden, in order

to study the increased internationalization opportunities presented due to recent

development and governmental reforms of the Swedish healthcare market.

(3) A private small or medium sized firm according to OECD definition given the limited

prior studies concerning the subject and the empirical importance as the majority of

Swedish healthcare service firms are regarded as SMEs.

(4) Active in at least one or more emerging markets, or rapid growth markets, as defined

by the International-Monetary-Fund, as well as one or more developed markets. The

institutional environment in emerging markets differs considerably from developed

markets; thus allowing us to analyze its influence on internationalization in greater

depth.


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The cases has been selected through purposive sampling in order to construct an analytical

unit that suits the predetermined criteria, which allows for a narrowing of the case selection

and enhances the probability of obtaining accurate and reliable data (cf Eisenhardt, 1989;

Saunders et al., 2009). Due to the specificity of the stipulated criteria, combined with the

recent emergence of internationalizing healthcare firms, seven cases were identified that

fulfilled the requirements. Out of the seven, five responded, out of which three where selected

to be included in the study through convenient sampling (table 1). The remaining two where

excluded after initial interviews that indicated that the cases did not fulfill one or more of the

stipulated criteria’s adequately. This follows the reasoning that purposive sampling allows for

the selection of cases that are “particularly suitable for illuminating and extending

relationships and logic among constructs” (Eisenhardt & Graebner, 2007:27) and will “yield

information that can best address the study’s purpose” (Merriam, 2010:458). Furthermore,

the specificity of criterion chosen also enables a high degree of homogeneity, which increases

the validity of the study (cf Barringer & Greening, 1998; Saunders et al., 2009).

Table 1. Analytical case units: Overview of case companies

COMPANY EMPLOYEES FOUNDED SERVICE MARKETS CUSTOMERS

Swedish Care International Talengen Care (partner)

1(8)*

2004

2011

Providing elderly and dementia care through education, training and nursing homes.

Japan Germany Spain U.K China

Suppliers of services to states and/or private providers

Scandinavian Care 5 1996

Delivering comprehensive cancer care through cancer centers, master hospital plans and consultancy.

25 projects world-wide Co-owned centers in Egypt, Portugal, Chile, Dominican Republic, Ecuador and Ghana.

Direct providers to end consumer

Global Health Partner

380 2006

Specialized diagnostics in spine surgery, orthopedics, bariatric surgery, gastroenterology, and arrhythmia.

Sweden Denmark Finland United Arab Emirates (UAE)

Direct providers to end consumer


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3.3 Data Collection

3.3.1 Primary data In-depth, open answer and semi-structured interviews have been conducted, which enables the

process to be explored in greater depth as it allows access to the respondents’ knowledge,

perceptions and experiences (cf Bryman & Bell, 2007) and is thus an efficient way to gather

rich, empirical data (Eisenhardt & Graebner, 2007). The use of open questions allows the

interviewees to formulate their responses in more detail and without being affected by a

predetermined direction (Yin, 2011). An initial interview with the head of the section of

international cooperation within the Ministry of Health and Social Affairs has been conducted

prior to our case interviews in order to broaden our understanding of the sector, as well as the

governmental initiatives to promote international trade. Initial interviews with the export

promoting organizations Swecare and Business Sweden has also been conducted to further

deepen our understanding of internationalization of health care firms. The pre-study

interviews also enabled a better understanding of the development of subsequent interview

themes. Furthermore, our key informants (table 2) from our case companies have been

selected due to their strategic responsibility for the firms’ international venture and have

superior knowledge of the internationalization process. All informants were either co-

founders, Vice Presidents (VP) or Managing Directors (MD), and were thus considered

particularly appropriate to interview, as they had partaken in the internationalization process

since the beginning. An interview guide (appendix 1) was sent out prior to the interviews in

order to further assure that the most suitable informants participated and to allow them to

prepare and remind themselves of historical events crucial for how internationalization

process unfolded, thus enhancing the accuracy and validity of the responses.

Interview process

The questions where developed out of the pre-study interviews and the literature review

regarding vital aspects related to regulated industries. Structured questions were used to

gather classification type data such as year of establishment, number of employees and target

markets and management characteristics (experience and international exposure). Open-end

questions where assigned into pre-determined topics, focusing mainly on the firms

internationalization processes, but also the industry and markets characteristics, in order to

ensure that the interviews included the most important aspects and were following the same

themes. Discussion questions evolved throughout the interview, in line with the open

exploratory approach, and the informants were encouraged to share their insights and


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experiences, to provide the researcher with a deeper understanding of the themes.

Supplementary follow-up interviews where conducted in order to both clarify and extend

previous response, which enhances the validity. All informants consented to being recorded,

further strengthening the reproducibility of reliable data. Original transcripts where sent out

for verification in order to provide further insights or reduce any misinterpretations, thus

assuring the accuracy of our data and enhancing the validity of the study.

Table 2. Informants and interview process. *Lengths of follow up interviews are enclosed within brackets.

COMPANY POSITION METHOD OF INTERVIEW

LENGTH OF INTERVIEW

Ministry of Health & Social Affairs

Head of the section of international cooperation and trade promotion Personal interview 1h 15min

Swecare Senior Advisor Telephone interview 30 min

Business Sweden Business Area Head – Life Science & Health care Telephone interview 30 min

Swedish Care International Talengen Care (partner)

Managing Director Founder/CEO

Personal interview Telephone interview

1h 50min (20min)*

45 min

Scandinavian Care Co-founder/CEO Personal interview 1h 30 min (25min)*

Global Health Partner Co-founder/Vice President Personal interview 2h

3.3.2 Secondary data A seminar concerning international health reforms held by Swecare has been attended prior to

the case interviews in order to further broaden the understanding of the opportunities for

internationalizing Swedish firms. In addition, archival sources such as internal company

documents and annual reports, as well as electronic sources including company websites and

trade association reports have also been examined.

3.4 Data Presentation & Data Analysis

3.4.1 Data presentation To sufficiently illustrate the variety and richness of the studied phenomenon, a narrative data

presentation approach has been employed, which is appropriate when studying a few cases in

detail (cf Langley, 1999). As the study explores a new and unique empirical context, a

narrative data presentation allows for the phenomenon to be carefully depicted in the

contextual setting in which it is embedded. By providing an accurately constructed and

detailed description of the data, all of its richness, complexity and subtlety that exist in the


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situation can be apprehended (ibid).

3.4.2 Data Analysis Data analysis has been conducted simultaneously throughout the process by adjusting our data

collection between, and during, interviews to ensure the quality, in line with the iterative

qualitative data analysis process (cf Merriam, 2010). Furthermore, the interviews were

transcribed to facilitate the categorization and analysis of the pre-determined themes, which

further allows for a more comprehensive cross case analysis to be performed, by weighing the

cases against each other and identifying patterns of relationships and their underlying logical

arguments (cf Langley, 1999; Bryman-&-Bell, 2007; Eisenhardt-&-Graebner, 2007).

Evidence that has been considered particularly important has been highlighted through quotes,

which further enables cross-case, as well as within-case, analysis (cf Yin, 1981). The collected

data was subsequently processed by comparing and analyzing it with the conceptual model,

which enabled it to be further refined and developed.

3.5 Quality of the Study Given the small and homogenous number of cases the scope in our findings becomes limited.

However, it should be noted that intent of the study is to deepen the understanding of a unique

empirical context and an understudied phenomenon, which can only be captured through in-

depth interviews. However, although the findings cannot be generalized statistically, the

empirical findings can be placed in relation to the theoretical conceptualization of the

phenomenon, thus allowing a certain degree of analytical generalization (cf Yin, 2003).

A second limitation concerns the variations in size of our case companies. The OECD

definition of SMEs allows for a greater variation in employees, compared to the more widely

recognized EU definition4. However, given the international activity of our case companies

beyond the boarders of EU, a definition by a supranational organization can be argued to be

more appropriate, as it has taken all regions into account. Furthermore, due to the limited

companies within the sector, it can be argued that the definition does not affect our case

selection, as firms with fewer than 500 employees (but more than 250) are still comparable

with small or medium sized rather than large players. Also, no other case companies that had

between 250 and 500 employees were identified, hence the number of potential analytical

units remained the same. 4 SMEs is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million euro (European Commission, 2013)


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Conducting interviews on retrospective events constitute an additional limitation, as the

accuracy of the data becomes dependent on the informants memory, thus compromising the

validity. To manage such, multiple data sources have been combined through triangulation.

Secondary data allows the collection of detailed historical information focusing on memorable

moments, which retrospective interviews might miss, thus allowing the depiction of past

events to a greater extent, and enhancing confidence in the accuracy and reliability of the

findings, thus improving the study’s credibility (cf Langley, 1999). Furthermore, data that

already exists in the situation and is thus not affected by investigator bias can be collected and

the empirical grounding and validity in the findings can be improved, which further enhances

the substantiation of theory building (cf Eisenhardt, 1989; Merriam, 2010). Interviews with

informants with different perspectives, such as government and promotion agencies, has been

combined with the case interviews, which allows for a more rich depiction of the

phenomenon, as well as reduces researcher bias, thus further enhancing the validity of the

study (cf Eisenhardt & Graebner, 2007).

The narrative data presentation also allows for a high level of authenticity and transparency,

which allows the reader to experience the setting and “assess the evidence upon which the

researcher’s analysis is based” (Merriam, 2010:460), thus further enhancing the credibility of

the study. The trustworthiness and reliability of the data has been further ensured by a high

degree of transparency, which has been reflected throughout the process.


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4. EMPIRICAL CONTEXT: THE HEALTHCARE SERVICE INDUSTRY The empirical context describes the health care system as well as clarifies relevant definitions

and aspects, with the purpose of providing a fundamental understanding of the healthcare

industry. On a broad scale the healthcare industry can be divided into three major sectors;

pharmaceuticals, medical technology and providers of health and social services (Bain &

Company, 2012). Mirroring the purpose of this thesis, only aspects directly relevant in

conjunction to the latter sector is included.

4.1 Healthcare Systems: Organization and Funding A health system is defined as a system ”comprising all the organizations, institutions and

resources that are devoted to producing health actions” (WHO, 2000:XI). The ultimate

responsibility for the overall performance of a country’s health system lies with its

government; however, how the health system is designed and funded varies considerably

among nations (WHO, 2000; Svensk Försäkring, 2013). The source for these variations can

be found in demographical and economical factors as well as values and traditions, which

constitute vital building blocks for how a health system is organized and funded (Gottret-et-

al., 2008; Anell-et-al., 2012; Kamp-&-Hvid, 2012).

4.1.1 Financing and Coverage Closely related to the structure of a healthcare system is how it is financed and what coverage

the system provides for its residents, which has a considerable impact on how people access

services and how much they spend on these from their own pockets. It also affects which

services are provided and by whom and how the providers will be compensated (Calltorp,

2008; Svensk Försäkring, 2013; World Bank, 2013a) There are generally five primary health

financing mechanisms: (1) General Taxation (universal coverage) (2) Social health insurance,

(3) Private health insurance (4) Out-of-pocket payments and (5) External aid (Gottret et al.,

2008; World Bank, 2013a). Globally, primarily high-income developed countries have

general tax revenue financing (ibid). These systems are often characterized by providing

medical coverage to the entire population and typically the delivery of health care services

takes place through a network of public providers (Gottret et al., 2008). However, general tax

revenues can also finance care from private providers or a mix of public and private providers

(World Bank, 2013a). In many countries health insurances play a vital part as funding and

coverage source for healthcare services (Svensk Försäkring, 2013), which are compulsory and

often tied to the individuals’ payroll (Gottret et al., 2008). However, the providers of the


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medical services within these countries are majorly private actors. Only a few countries have

predominately non-mandatory private health insurance financed systems. In most countries

however, private health insurance works as a complement to the primary coverage. In

developing countries out of the pocket payments constitute one of the most common health

care financing types, often larger than government spending (Gottret et al., 2008). However,

they have a propensity to decline when the country’s income rises, often paving the way for

the introduction of other financing mechanism such as social and private insurances (World

Bank, 2013a).

4.1.2 Reimbursement: Compensating the Providers How the providers of medical services are financially compensated is known as

reimbursement and differs between countries as the payment model in use to a large extent

can be explained by how a country’s healthcare system is designed (Casto-&-Layman, 2006;

Gottret-et-al., 2008; Calltorp, 2008). The industry has a complex revenue function, which

distinguishes it from other sectors. The source of the complexity stems from that a majority of

payments is not paid by the patient, but rather by a third party on the patients behalf (Casto &

Layman, 2006). Moreover, the determination of payment from a third party payer is based on

pre-established or negotiated rules of payment, further increasing the complexity. Yet another

vital factor in relation to reimbursement in healthcare is that the government often is the

largest primary payer and does not negotiate payment but simply defines the rules for

payment upon which it will render compensation for services provided to its beneficiaries

(Casto & Layman, 2006).

In practice, health systems commonly integrates some, or all of the mechanisms at once and

there is a lot of mixing of approaches across these general financing models (World Bank,

2013a). A noticeable trend within countries where a large part of the provision of healthcare is

financed and delivered by the public sector is a rising tendency to move towards increasing

private elements in both funding and execution of healthcare services (Munkhammar, 2010;

Svensk Försäkring, 2013, Vinnova, 2013). The reason for this shift can to a large extent be

explained by that the government spending on healthcare is rising at a pace that is likely to be

unsustainable unless new funding sources are utilized (Munkhammar, 2010; Vinnova, 2013;

Vårdföretagarna, 2013). Hence, today even healthcare systems that are built upon general tax

revenue funding rely on for-profit companies for the supply of services, in order to make the

provision of healthcare possible (Holden, 2005b). Following this, an emerging trend of


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diverse Private-Public-Partnership (PPP) forms has evolved (Akintoye et al., 2008; PwC,

2010)

4.1.3 Private-Public-Partnership There exist widespread types of PPP forms, making the definition of the phenomenon highly

complex (Akintoy et al., 2008). However, at its core PPPs can be described as partnerships

between the private sector and government in which the common features are that the public

sector contracts, usually on a long-term basis, with the private sector for the provision of a

public service (Akintoy et al., 2008; PwC, 2010; NCPPP, 2013). Through this agreement,

resources, risks and rewards are shared in the delivery of a particular public service (Akintoy

et al., 2008; PwC, 2010; NCPPP, 2013). As governments around the globe are increasingly

looking to the private sector to tap expertise, as well as for financing and delivering

healthcare, the extent of partnership projects in healthcare grows, which enables a much larger

potential market for private organizations (PwC, 2010). Moreover, cooperation within the

healthcare sector also occurs on a global level, incorporating several actors, including

international intergovernmental organizations, private actors and the public sector. This is a

particular common in conjunction with emerging market (Buse & Walt, 2000). International

intergovernmental institutions such as the World Bank are providing loans to the borrowing

nation and carrying out projects in a range of developing countries where private companies,

from member countries are eligible to participate in international competitive bidding in order

to take part in these projects (World Bank, 2013b). The projects supported by these loans

constitute important business opportunities for firms who aim to expand their business and

venture abroad but it is imperative that firms are knowledgeable about how the procurement

in each respective country is conducted (ibid). Moreover, public procurement, which is

defined as the procurement of goods and services on behalf of government agencies (WTO,

2013), is highly nation specific. Even if continuous work is done among international

institutions regarding harmonizing public procurements, nations have their own laws and

regulations on how the procurement processes should be carried out (World Bank, 2013c).

4.2 The Swedish Healthcare system The Swedish healthcare system provides 100 % equal universal coverage for all residents

(Commonwealth Fund, 2011; Anell et al., 2012). The current health system mirrors a long

history of public funding and ownership and is structured in three levels; the national,

regional and local (Svensk Försäkring, 2013). While the state is responsible for overall health

policy, the funding and provision of health care services has been delegated to the 21 county


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councils, whereas at the local level, the 290 municipalities are accountable for financing and

organizing the care of older and disabled people (Kamp & Hvid, 2012; Ekonomifakta, 2013)

There is a mix of publicly and privately owned healthcare facilities, however they are mainly

publicly funded (Anell et al., 2012). Primary care forms the base of the health care system,

and for conditions requiring hospital treatment, medical services are provided at hospitals at

the county level. Moreover, tertiary medical care, referring to highly specialized care, such as

cancer treatment (John Hopkins Medicine, 2013), is concentrated to regional/university

hospitals (Anell et al., 2012). Healthcare expenditures in Sweden is equivalent to 9,9 % of the

nations GDP and is primarily tax funded, which corresponds to approximately 80 % of

healthcare expenditures (Anell et al., 2012). Hence, Sweden has a relatively small part of

privately funded health care, which constitutes approximately 17 % of the healthcare

expenditure and is funded through user charges for health care visits to professionals.

4.2.1 New Reforms and Regulations Stemming out of a change in attitude towards health care and its public providers, new

objectives related to cost- and quality control has increased in prominence (Anell et al., 2012).

This changing attitude, and the criticism it entails, has urged for the initiation and

implementation of a number of New Public Management reforms. Following this, a change in

the Health and Medical Services Act in 2010, made the freedom of choice of primary care

provider for the population as well as freedom of establishment for private care providers

mandatory, providing equal conditions for establishment. However, the Act came under the

prerequisite that private care providers requires accreditation by local county councils, which

conditioned whether or not the private provider is eligible for public reimbursement, thus

allowing the county councils to control the public funding. If the private provider does not

have an agreement with the county councils, the provider is not reimbursed and the patient

will have to pay the full charge to the provider. Moreover, given the decentralization of

provision of care, such criterions vary between the county councils (Anell et al., 2012).

In parallel to the development of freedom of choice in primary care there is an ongoing

process to expand the same approach to also include private specialist elective providers

(Bengtsson, 2012; Praktikertjänst, 2013). But unlike the free choice of primary care, which is

mandatory by law, it is optional for counties to implement the same provision in regards to

specialized care, which has led to large differences around the country. At present the shift


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occurs primarily in Stockholm but other counties are following, which opens up great

possibilities for private actors to expand and grow in the home market (ibid).

4.3 Export of Swedish healthcare Outward FDI within the Swedish healthcare sector has in recent year grown, and several

private Swedish healthcare companies have established presence abroad. In 2010 these firms

had 10 000 employed overseas (Munkhammar, 2010). A condition which has opened up for

these possibilities is among other things the changing landscape for private providers in the

Swedish market, as explained above, as well as several countries worldwide offers a market

for private providers (Munkhammar, 2010; Vinnova, 2013). Hence, how a country’s health

system is organized and consequently, how big the commercial sector is, the level of

government versus private split in funding and delivery of healthcare services, constitute a

key parameter when assessing the potential market size for firms within this industry (Smith,

2004)

However, compared to other industries, Swedish export of health related services are highly

modest, especially among SMEs (Andersson, 2013; Hallersjö, 2013) and the reason for this is

multifaceted. As highlighted in the report published by Vinnova (2013), it is a challenge to

generate business around systems that are fundamentally public and not commercial or for-

profit. Moreover, the Swedish healthcare system, with emphasis on decentralization of

responsibility to the country councils and municipalities has a fragmented public procurement

structure, which can be a barrier for growth for SMEs (Munhammar, 2010; Vinnova, 2013).

According to Munkhammar (2010), this aspect is imperative since in order for these firms to

become internationally successful, they must be able to develop and grow in the Swedish

home market. Moreover, since healthcare tends to be amongst the most heavily regulated

sector of a nation’s economy, there exist a plethora of complex regulations, concerning

standard of healthcare, establishments and accreditation, reimbursement and public

procurements. Christer Andersson (2013) at Swecare explain that knowledge regarding such

regulations, as well as how a countries health care system is structured, are the same aspects

which firms need to learn to handle at home, but its considerably more difficult to learn how it

works in the international market.


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5. PRESENTATION OF CASE FINDINGS

5.1 Scandinavian Care AB Scandinavian Care (SCAB) is a privately owned health care service provider, delivering

comprehensive cancer care. The company was founded in 1996 and has since been active in

25 different nations through various types of projects. The founder has a background in

management consulting and the co-founder as a chief surgeon. SCABs services range from

project management and consultancy services - such as the planning health care systems,

which are financed through the World Bank – to starting, financing and investing in cancer

centers in cooperation with local partners. SCAB are currently part owners in six centers in

Egypt, Portugal, Chile, Dominican Republic, Ecuador and Ghana.

5.1.1 Rationale behind Venturing Internationally SCAB does not have any presence in the Swedish market and started to operate

internationally immediately from start-up as a response to the higher levels of market demand

overseas and the unfavorable conditions of the home market. “There is such a preponderance

in regards to supply of services in developed markets contra the developing world,” explains

the founder and argues that there is an enormous shortage of specialist cancer care in

developing countries, where the demand is substantial. Such vision follows in line with

SCABs business strategy of starting and partaking ownership in specialist cancer centers in

countries where such services are lacking. SCAB states that Sweden, in general, already

possess the necessitated supply of services through the public system, and that no larger

demand for additional private cancer centers is recognized. Sweden also has a relatively strict

health care system due to the deeply rooted public ownership and financing that causes

difficulties, in contrast to foreign markets where “healthcare is much more of a business than

what it is in Sweden”. Furthermore, the co-founder has, through his previous experience as a chief surgeon of a

Swedish hospital, acquired a large international professional network, which “surely

contributed to that we received enquiries from overseas already from the beginning from

which the operations has simply continued”.

5.1.2 Continued International Activity In line with SCABs business idea, emerging markets have been identified as natural and

strategic target markets for the company. The decision of which market to select is argued to

be contingent on having a reliable partner. When venturing into Egypt, which also was


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SCABs first market in which they invested and took part ownership, two Egyptian-Swedes

where coincidentally identified through connections in the co-founders network and enabled

access into the market. Another example includes a random Ghanaian-Swede, whom

approached Scandinavian Care with an order for a cancer project in Ghana, as no such service

was adequately provided in the nation, and became a close partner. In addition, SCAB

emphasizes the importance of a having a partner with a relation to Sweden in order to

facilitate the collaboration, which has also been the case in the majority of the company’s

market entries.

However, the founder points out that although it is more often coincidences that determines

the market selection, rather than planned aspiration, certain essential conditions must exist.

Financing is emphasized in particular and is always a challenge to address for a small firm

with limited resources. Concurrently, the founder notes that investing and becoming part

owner in cancer centers, indicates to the market that you are in it for the long run, which can

enhance the firm's credibility. Another vital aspect, is the prerequisites for patient solvency,

whether through governments, private insurances or a combination of the two. Thus, the

security of reimbursement in each market is assessed. An additional essential condition

emphasized encompasses the political risk of corruption, as well as the limits on outward

capital transfer. Ecuador was exemplified as a country in which business for foreign firms had

shown to be difficult as the government taxed foreign capital transferred out of the country.

The founder explains that “Ecuador, which we invested in a couple of years ago, wouldn’t we

invest in today”. Hence SCABs approach since has become much more structured and

thorough when evaluating countries to invest in. The founder also explains that yet another

influence of market selection is international public procurement, where the market thus

becomes determined by the contract. These types of international procurement project also

enabled progression of new projects in the same market, which has been the case in several of

the international projects undertaken by SCAB.

In relation to the company’s international venture, the founder also mentions Sweden’s export

promotion activities, such as delegations, as something irrelevant to them as “it takes too

much time and costs too much. We have often been able to progress with our own contacts”.

Moreover, seminars arranged by export promotion agencies are not seen as beneficial as “it is

not where your goals are reached […] and where you meet the right people. A much more

hands on approach is required and you have to be present in the market you intend to enter”.


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Furthermore, joint ventures with local partners are explained to be the most common choice

of entry mode. This has been the case in all of the markets where SCAB has chosen to invest

and take part ownership. The founder explains that it is important to find a partner, whom can

be trusted to 100 percent, and who “knows the local market, all of the tricks and has personal

contacts”. Thus, given the importance of partners, the founder also explains that time is

required to pass to gradually get an understanding for each other and the networks in which

they are included, in order to establish a relationship. In addition, the partner is explained to

be of vital importance as he/she is assumed to manage the political policies and gain access to

decision makers. In some cases SCABs partners has connections as far as all the way up to the

presidential level, which has been a vital resource in order to manage the political uncertainty

and deal with hinders stemming from corruption. SCAB has also entered via private-public

partnerships, which was the case in Egypt, where a contract with the Minister of Health was

negotiated. However, the firm suffered from a breach in contract when only half of the agreed

reimbursement was received, which can be illustrated from the following conversation;

Founder: “This is not what we agreed upon.”

Minister: “But I have decided to change the agreement.”

Founder: ”You have!?”

Minister: “Yes, I am the Minister.”

And since the company could not sue the government, they had to find other ways to be

reimbursed, and did so by increasing their patient quota. Hence, the founder continues to

explain that certain markets can be operated in, but not invested in, since the “corruption

factor is far too troublesome and the government is pulling in the wrong direction”. This has

also been learnt in Ecuador, where the conditions for foreign firms investment have been

gradually mistreated. Thus, the partners are also required to have knowledge concerning how

to handle corruption issues, and convey messages to political actors in order to open doors.

The founder goes on to discuss that certain markets perceive involvement, or collaboration,

with public organizations as something suspicious. This is illustrated by the case of entering

into Ecuador, where SCAB was working together with the Swedish public organization,

Swedfund, which the intended partner perceived as suspicious. Hence, the founder explains


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that “our main approach [since] is to be as private as possible and as little involved as

possible with the government”.

5.2 Swedish Care International Swedish Care International (SCI) is an internationally active company that packages and

export elderly- and dementia care in form of education, certification and nursing home

concepts. The company, founded in 2004, was restructured in 2011 and sold to their largest

supplier of elderly care services - Silviahemmet. In conjunction, a new Managing Director

(MD) was appointed with a background as CEO for Swecare foundation. The MD is the sole

employee of the firm, however eight consultants strengthens the manpower. SCIs customers

are diverse, ranging from organizations, which are governing training and educations, to

healthcare companies whom aim to add value to their own services by internal training.

However, a common parameter is that they are all active within the elderly care sector. The

company is currently present, via distributors and licensees, in Japan, Germany, Spain, UK

and China.

5.2.1 Rationale behind Venturing Internationally SCI has been international from inception. The initial motive to start operations abroad

stemmed from a political initiative, based on perceived increased market demand for Swedish

elderly care in Japan. The market was approached by setting up a wholly owned subsidiary

with four Swedish employees, however this institutional arrangement did not work out as

planned. According to the MD the reason for this was multifaceted. Firstly, the hardship for a

small player to manage a subsidiary located far away, as in Japan. Secondly, “the most

important reason was, [and still is] the structure of the healthcare market, which varies

considerable in every country and entail different conditions […] making it difficult to

handle”. Following this, the subsidiary was liquidated, and the company was sold to

Silviahemmet. According to the MD, who was part of the process through her previous

position as CEO at Swecare, this shift opened for opportunities for SCI in regards to expand

internationally. First, the owner structure, a not-for-profit foundation, but still completely

private and fully dissolved from all public actors, enables more efficient decision-making.

Secondly, Silviahemmet is a well-known brand name internationally, and has been working as

a facilitator to incoming enquiries for SCIs services. Moreover, through Silviahemmet, which

has widespread operations in Sweden, SCI have important reference points in the home

market, which is explained as a vital factor in order to succeed internationally. This has

created a unique situation for the firm that enables and triggers internationalization, which is


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difficult to achieve in the Swedish healthcare market due to barriers of failing fundamental

market conditions. “We have a large service export, but not in relation to healthcare services.

It depends more on our own conditions in Sweden, we have a system which does not

encourage entrepreneurship, and entrepreneurship is a prerequisite for internationalization”.

The MD notes that this is not only based on that the healthcare system in Sweden is

dominated by public ownership, but also that various policies within the system tends to shift,

creating uncertainty, and thus lowering entrepreneurs willingness to invest in the sector.

However, the MD states that it is a great personal motivator to try to find ways to export

services, which SCI are now doing, and the approach is explained as very unique. “There are

examples that are more classic, such as, establishing a hospital in another country. However,

that is not what we are trying to do. Instead we are trying to break down available skills and

knowledge and package it. In order for this to succeed it has to be conceptualized in a way

that makes it able to sell”.

5.2.2 Continued International Activity Since the new start in 2011, SCI have entered a number of countries, including Germany,

Spain, UK and China, almost simultaneously. In all the cases the firm has been approached by

an interested actor, whom the firm has, after evaluating the enquirers potential, in terms of

trustworthiness and similar core values, deemed appropriate as a licensing or distributor

partner. SCI have used the same entry mode in all markets, which is explained by the MD as

a strategic decision “…based on the company's experience in Japan, we have chosen not to

have subsidiaries in other countries, we do this through licenses and distributors”. Since the

healthcare industry is very nation-specific, it is difficult for SCI to learn how to manage

differing forms of financing mechanisms, traditions, and procedures in the health system.

Thus, SCI have chosen to enter via local partners whom possess expert knowledge; “The

reimbursement system is very difficult to manage if you have to manage it yourself. But if you

have a licensee who knows the market, then they know how they should get compensated.

They have an understanding of the conditions and how the market is functioning”. Moreover,

through previous experience at Swecare, the MD has seen many companies with great

products fail in their international venture due to implications stemming from generating a

thorough understanding of the reimbursement system in the targeted market. This has also

contributed to SCIs choice of using licensing as entry mode. Furthermore, it is vital for SCI to

be flexible in the health care industry, as the market conditions tend to shift frequently, which

heightens the financial risk for a small company. The MD explains that “it is only needed that


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a country that we have a lot of business in suddenly makes some changes in their laws, or

commit to a new form of aid for the training of its medical staff. It can change the conditions

for us instantly”. According to the MD, this element further adds to their choice of entry

mode. In relation to the company’s international venture, export promotion activities and

agencies are highlighted by the MD as a beneficial door opening function, but states that such

has not been relevant in their case. This is explained by her background, which has allowed

her to already establish relationships with local government agencies. It is also explained that

these agencies posses knowledge, grounded in their own culture, which is more valuable than

the information provided by domestic agencies.

SCIs choice of markets is described in further detail, which to a far extent has been an

outcome of enquiries from actors in the respective markets. However, on a general note, SCI

prefers to enter mature markets due to the widespread knowledge about elderly care. As basic

market knowledge concerning elderly care is often lacking in emerging markets, the firm

becomes constrained by the market conditions. This requires SCI to start by educating the

market to spread a broader general knowledge concerning elderly care in order to grow, which

is done in close collaboration with their license partner ‘Talengen Care’ in China. The

partnership was initiated by the founder of Talengen Care, whom has considerable knowledge

about the Swedish market from living and working within the medical field in the country for

several years. The founder saw an opportunity in China based on an increased market

demand, stemming from an aging population in conjunction with a rising level of disposable

income. The founder states that “the market in China is very premature...so we are at a very

early stage in this whole industry, this is both an advantage and a disadvantage. We have to

educate the market, but in the same time we get quickly well-known in the circle by being one

of the first international players”. In correspondence to emerging markets such as China, the

MD notes the importance of having a reliable partner, this since, “it is more difficult to attain

credible information about prerequisites in the market, and these conditions can also change

quickly “. Hence, it is vital that SCI can trust their partners’ capabilities in managing changing

conditions, which is a common feature of the industry.

In conjunction with market choice, the MD also highlights the notion of restrictions and

regulations, which impact SCIs ability to establish in certain countries. “It has happened that

we have received enquiries from actors that we have assessed as being potential partners but

where it appears that they must have an education license that they do not have and that the


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process to get it for them has been so long that we have refrained to take the leap”. This

aspect differs between developed and emerging markets, where this hinder is often associated

with developed countries, and no such license was required in the premature Chinese market.

SCI strategically decided not to enter markets characterized by high political turbulence and

corruption risk due to the MDs accumulated knowledge concerning these markets.

5.3. Global Health Partner Global Health Partner (GHP) was founded in 2006, providing specialist care in a limited

number of diagnostics areas, ranging from spine surgery, orthopedics and bariatric surgery to

metabolic diseases and arrhythmia. GHP believe that health care can be provided more

efficiently and at a higher quality in clinics outside the traditional, public hospitals. The

chosen specializations stem from a combination of an increased demand for higher quality

care and new types of treatment, combined with the privatization of the Swedish health care

sector, where public hospitals have been forced to prioritize emergency care or “higher status”

areas such as, cancer care, over resource demanding elective care. Both founders have a

background of starting up, and operating, medical centers, before coming together to launch –

GHP. The founder/president has previously established Sweden’s largest international health

care chain, while the co-founder/vice president (VP) has previous experience from

establishing a well renowned spine center. GHP is today co-operating clinics in four different

countries; Sweden, Denmark, Finland and the United Arab Emirates (UAE).

5.3.1 Rationale behind Venturing Internationally GHPs motive to venture internationally was a strategic decision to exploit a small number of

specialized niches with a large number of clinics within each, in order to benchmark across

borders. Hence, GHP entered several markets almost simultaneously during early stages of

establishment. However, unforeseen changes in the external environment have altered the

strategy, and focus has shifted towards fewer markets and more niches.

The VP explains that a fundamental interest to internationalize is a prerequisite, but

emphasizes coincidences as a key factor triggering and driving international activity.

“Coincidences stems from an existing fundamental interest to operate internationally to begin

with, which allows exposure to different environments and contacts.” The VP particularly

emphasizes his co-founders previous extensive experience and knowledge within the industry,

as well as his professional network, as fundamental to operate within the industry, especially

internationally. The VP claims that “he [the co-founder] is the only one within Swedish


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healthcare […] who has substantial international experience from health care. He is in the

system, which means that he has managed to establish contacts, in the equivalence to

[Swedish] counties, in Germany, Spain, and all Nordic countries, as well as politicians,

ministers of health and similar”.

Challenges with the Swedish healthcare system for GHP are also highlighted. The public

procurement system is fragmented between different county councils, where conditions for

obtaining contracts differ considerably. Moreover, the contract is often time constrained,

requiring re-negotiation at the end of each term, allowing new actors to compete for the same

contract that has previously been invested in, generating a risk of capital loss. The VP argues

that “it is actually not possible to conduct business if you have this type of risk. You build a

capital structure for five years and then you risk losing the contract in a month. Do you invest

in the business, do you commit, or is it more of a calculus exercise for five years?” However,

the VP notes that recent policy changes in the Swedish system, has started to shift in favor for

private actors, where public procurement is becoming based on quality, rather than price, and

contractual time constraints and thus, re-negotiation of contracts, is starting to fade.

Furthermore, the potential of the industry, and the potential for value creation, is considered to

be immense for GHP, as the market for health care is still immature. The industry is

considered to be in a restructuring phase caused by a healthy pressure, which presents itself

through differences in nations systems, reimbursement models and accreditation. The co-

founders experience, knowledge, and network are yet again emphasized as key to exploit this

opportunity. “He is an agent of ideas, he sees all differences [between the markets] and he is

some type of living encyclopedia.”

5.3.2 Continued International Activity Following this, GHP selects markets based on where there exists a market for private firms

and where the differences in systems are not hinders, rather opportunities. The VP explains

that they must first consider the “commercial conditions and permit issues and similar.

Afterwards, you must ask yourself, is there an accessible market? Does it exist a

reimbursement model, which allows the operation of this business?” Although some

similarities exist, all systems differ significantly, and certain markets are difficult to enter, or

have undesirable conditions, which makes it difficult to generate sufficient volumes. Norway

is such a case that GHP entered and later was forced to exit, since the Norwegian health care

system is publicly driven and where the government want to segregate the market from


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private actors. Similarly was the case of the Czech Republic, and to a certain extent Denmark,

due to unaccounted for, and unmanageable political risks. In Denmark, GHP had just received

accreditation to provide bariatric surgery, and invested heavily into the business. Suddenly,

the county in question shifted the conditions on which patients were entitled to the procedure,

thus reducing the potential market with 80 percent, pushing GHP to divest parts of their

operations. In the Czech Republic, the public insurance reimbursement system was reformed

and consequently reduced the contract value with 30 percent overnight, forcing GHP to divest

and exit the market. Consequently, GHP is now primarily focusing on Sweden, Finland and

remaining operations in Denmark. The VP explain that GHP spread themselves relatively

culturally close at first and argues that “it has to do with personnel responsibility and being

able to apply models” referring to the Swedish model.

However, GHP is also active in the United Arab Emirates (UAE), which started as an

international public procurement (IPP) opportunity from the UAE Ministry of health. The

opportunity arose when a network acquaintance contacted GHP concerning an IPP request in

the Caribbean. The VP explains that “We were eager and had our tentacles out, and listened

a lot. Then all of a sudden an international public procurement request appeared [in UAE],

as there exist a market for international public procurements there.” The Caribbean was thus

neglected, as the potential for the UAE deemed larger. However, the IPP request concerned a

bariatric and diabetes center and the process went quicker than expected, which is clarified by

the that market revealed a huge interest and demand for their services.

However, unlike previous markets, which were entered through acquisitions, or Greenfield

investments, the UAE was entered as public-private partnership (PPP) management contract.

Previous markets had required investments in equipment and facilities, which entail juridical

and financial risks to a certain extent, as “the money does not come automatically. It follows

certain game rules, which the insurance companies can compete for, and even question”. But

such risk was perceived to be much higher in the UAE due to larger differences in cultures

and systems. In the PPP contract, the ministry is the client but also dictates the conditions,

such as reimbursement. According to information received from the Swedish ambassador in

UAE, the governmental counterpart of the contract might be able to evade, or even refuse to

pay for, an established agreement. A hypothetical conflict with the UAE government cannot

be won, thus increasing the risk even further, and a different method of entry was suggested

from the ambassador. Hence, given the large cultural and systematic difference, and the


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perceived high political risk, GHP determined that they could not follow the same entry

strategy as earlier. Since the management contract did not require any capital investment,

GHP considered the request as attractive and took the decision to proceed with it.

Furthermore, Sweden has good trade relations with UAE, enabling information to be acquired

from the Swedish embassy in UAE, where the ambassador facilitated access to contacts, set

up meetings and supported with information concerning the different regional/cultural rules

and norms.

In conjunction with entry into the UAE market, the VP highlights that it was not as structured

as in Sweden. Consequently, patients started to drop into GHP facilities from everywhere,

without being remitted through a primary care center first – an aspect that the company had

not accounted for. Hence, GHP had to start educating primary care units within the nearest

vicinity so they could remit patients in need of specialized care to GHP, which in turn remit

patients back to primary care units for follow up checks, thus initiating the development of a

structured health care system – at least within diabetics. Thus, the VP argues that they intend

to incorporate responsibility for the entire diabetes primary care education into their next

contract. The VP states that the system is still immature and explains why this is such a great

opportunity. “Now we are developing this and are going to construct a second center [in the

UAE], and we might have use of the knowledge that we are generating in the continuous

planned expansion in the region.” The Swedish competency is the driving force for this type

of management contract export, and the competence gap is bigger to emerging markets, rather

than to culturally close markets.


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5.4 Summary of Empirical Findings Table 3. Summary of main empirical findings

COMPANY CORE BUSINESS TRIGGERS/MOTIVES MARKET SELECTION CHOICE OF ENTRY MODE

SCI

Conceptualizing, packaging and exporting elderly- and dementia care.

Political initiative. Overseas demand. Unique owner structure & reference objects.

Outcome of enquiries. Preferring developed markets. Restrictions on education licenses. Political risk deters.

Licensing. (Wholly owned subsidiary).

SCAB

Management consultancy projects within cancer care. Co-organizing cancer centers.

Unfavorable home market conditions. Large demand overseas. Previous experience and established networks.

Preferring emerging markets. Contingent on network relations. IPP projects determine market. Political risk deters. Security of reimbursement.

Private public partnership. Joint ventures. Management Contracts.

GHP

Acquiring, investing in and operating specialized elective diagnostics clinics.

Previous experience & network. Strategic decision to exploit market potential abroad.

Size and accessibility of commercial health care market. Preferring culturally close markets. IPP projects determine market.

Primarily through acquisitions or greenfield investments. PPP via management contracts.


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6. ANALYSIS The following analysis presents insights from the empirical findings, which are analyzed in

the light of the developed conceptual framework in order to enhance the understanding of

how Swedish medical service providers internationalize. The analysis is structured in

accordance with the identified main elements of the internationalization process in order to

explore what factors influences the process.

6.1 Triggers and Motives for Internationalization The empirical findings reveal that all three case companies can be classified as INVs

according to Oviatt & McDougall’s (1994) definition, as they became international almost

instantly from inception. Prominent explanations for this fact can be found in the common

pattern among the case firms, showing that the institutional and political context, both in the

home and international market triggered the firms’ international venture.

Garcia-Canal and Guillén (2008) emphasizes that within political salient industries,

privatization triggers opportunities to enter foreign markets and according to Munkhammar

(2010), several nations and their healthcare systems offer a larger commercial market

potential, in comparison to the Swedish market. A combination of immense overseas demand

and the limitations of the domestic market has been identified as a common pattern for

triggering internationalization among all of the case firms. Although in two of the case

companies the demand was identified and acted upon by the firms themselves, the trigger to

exploit overseas market opportunities was also revealed to stem from a political decision,

which further supports Garcia-Canal & Guilléns (2008) reasoning that the political

environment within political salient industries have an widespread impact on the firms

commercial activities. The conditions behind why the home market can be considered limited

varies among the case firms, which can be argued to depend on which health care segment the

companies are active within. The domestic market is already able to fulfill the necessitated

supply of tertiary cancer care through the public system, and consequently, no such market

exists domestically for SCAB, thus triggering internationalizing as a necessity for survival. In

contrast to tertiary care, specialized elective segments are selectively contracted out to private

firms, although in limited numbers, which constrains GHPs opportunities domestically.

Hence, in order to grow, international expansion was based on a strategic decision.

Nonetheless, as indicated by the following findings, it can be argued that the international

institutional environment will trigger firms to venture internationally, even though the


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findings reveal that the decision to do so might stem from different sources, and the

institutional context in the home market will also influence the firms’ decision to initiate

internationalization, although the rationale behind the decision differs.

Additionally, policy uncertainty in the home market was also highlighted as a barrier for

growth by the case firms. Aspects such as frequently shifting policies as well as fragmented

public procurement systems among the various county councils causes uncertainty in terms of

risk for capital loss. Hence, as indicated by the reasoning above, it can be argued that the

institutional and political context in the home market both act as a trigger for

internationalization, but also as a hinder, by reducing the potential to generate economic

muscles, which according to Munkhammar, (2008) is an important prerequisite to drive

internationalization. Therefore, political and policy uncertainty, which the academic literature

often solely highlights in conjunction with entries into a new institutional context (see,

Henisz, 2003; Jansson, 2007; Garcia-Canal-&-Guillén, 2008; Maekelburger-et-al., 2012), is

also prevalent in the home market for these firms.

Furthermore, the empirical findings indicate a common pattern among the firms, where the

previous experience and knowledge have a triggering effect on the internationalization

process and also reduces uncertainty, aspects which are discussed extensively in the

entrepreneurship literature (cf Blomstermo-et-al., 2004; Suárez-Ortega-&-Álamo-Vera, 2005;

Lindstrand-et-al., 2011). Yet another common pattern across the companies, highly

interrelated with the reasoning above, is the prominence of the owner and managers

established personal and professional international networks and their driving influence on the

process, which is further in line with several scholars’ argument that network acts as catalysts

for international expansion by triggering opportunity detection abroad (Johanson-&-Vahlne,

1990; Ellis, 2000; Chetty-&-Patterson, 2002; Zain-&-Ng, 2006). Thus, the following

reasoning highlights the influence of knowledge and networks on the firms’

internationalization process.

In addition to professional networks, it has been suggested that export promotion agencies as

well as related networks (e.g. intermediary relationships), are important in concurrence with

SMEs internationalization as they have a triggering effect, influencing firms in terms of

overcoming diverse barriers related to internationalization (Morgan-&-Katsikeas, 1997;

Chetty-&-Patterson, 2002; Crick-&-Spence, 2005). However, this notion is contradicted


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across the case findings, as the research rather shows that the case firms requires local

knowledge concerning the complexity of the institutional context, which can be more

adequately acquired through the superior knowledge of a local partner. The findings also

reveal that the case firms prefer utilizing already existing networks instead of relations

established through intermediaries. Thus, given the institutional complexity of the health care

industry, it can be argued that the importance of intermediary relationships becomes less

relevant – at least as a triggering effect on the case firms internationalization process.

6.2 Market Selection As noted in literature, political salient industries such as healthcare are surrounded by a

plethora of rules and regulations, which influence firm’s internationalization to a large extent.

It is further suggested that these firms select markets based on the countries degree of

deregulation and related specific institutional circumstances (Garcia-Canal-&-Guillén, 2008).

The empirical findings support these arguments, as factors stemming from the institutional

and political context have an extensive impact on which markets the case firms chose to enter.

These factors are revealed by the cases in terms of conditions for obtaining licenses,

functioning reimbursement systems, an accessible and encouraging private market and the

overall structure of the health system, which can either limit and deter certain potential

markets or provide opportunities. Either way, as indicated by the findings, it can be further

suggested that the specific institutional environment influences the firms’ market selection.

The empirical findings suggest that SCABs market selection is influenced by exploiting a

bigger difference in healthcare system, and consequently a larger knowledge gap between the

home and host market, as they are primarily selling advanced tertiary care, thus targeting

emerging markets where this knowledge is lacking. This follows in line with Ojala’s (2009)

and Oviatt & McDougall’s (1994) arguments that SMEs are more likely to proactively seek

opportunities and select target markets based on the market potential. However, even if SCAB

invest in some of their clinics, they do not undertake the same financial and juridical risk in

comparison to GHP, as GHPs core business is not solely based on selling expertise but rather

to carry out the operation. Based on this reasoning, GHP primarily chose to enter closer

markets were the institutional differences in comparison to the home market are not as

extensive and the risks are perceived as lower. SCI on the other hand are active within the

elderly and dementia care segment and thus have different prerequisites, as knowledge

regarding such is not as widespread as it is in western markets, thus influencing its market


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selection. Based on the following findings, it can be argued that two of the case firms

primarily follow a pattern of entering geographically and culturally similar markets in order to

ensure a mature and established sector with sufficient knowledge required to provide their

services, as well as to manage the uncertainties stemming from differences in institutions and

health care systems, which follows arguments that firms tend to enter markets with low

psychic distance (Johansson & Vahlne, 1977). Hence, it becomes reasonable to suggest that

the deviations in the case firms market selection can be explained by the nature of service

provided by the firms.

Furthermore, a common pattern identified show that the case firms collaborate with partners

that have strong connections to Sweden, often through dual citizenships, which can be

illustrated by the partner arrangements of two of the case firms. It can be suggested that these

partners, whom have an understanding of both the Swedish as well as superior knowledge of

the host market from where they origin, could reduce uncertainty stemming from psychic

distance. Consequently, the partners’ origin and foreign citizenship could also dictate the

market selection of the firm. Thus, it can be argued that the notion of psychic distance plays a

pivotal role in market selection although not at a firm level but rather at a personal level (cf

Johansson & Vahlne, 2006).

An additional common pattern highlighted in the findings was that the firms established

contacts influenced the firms market selection, and enabled them to overcome challenges of

outsidersip, which cohere to similar arguments discussed extensively in literature (cf

Coviello-&-Munro, 1997; Johansson-&-Vahlne, 2009). Being approached by overseas

demand, either through previously established network contacts, or unsolicited enquiries,

which after a period of time became partners, illustrates the case firms’ pattern of market

selection. Thus, the discussion of network insidership rather than psychic distance becomes

even more fruitful in relevance to selecting international markets for the case firms. However,

as illustrated by the case of GHP and SCAB, contacts necessary to select and enter a market,

which Johanson & Vahlne (2009) argues stems from network insidership, can also be

established through the contract of public procurement projects in which they have been

determined. Based on the empirical findings, where two case firms embrace IPPs, it can be

argued that in occasions of IPPs firms can venture to international markets without having an

established network position, as such can be acquired through the conditions of the contract.

Similarly, and in line with O’Farrell & Wood’s (1994) reasoning, the public procurement


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contract also conditions which market the project is situated in, which is illustrated by SCAB

and their project-based market selection. Following this, the empirical findings give

convincing evidence to suggest that networks, either pre-established or acquired through

unsolicited demand or procurement contracts, play a pivotal role in the firms market selection,

thus heavily supporting the influence of networks on the firms internationalization process.

Lastly, the empirical findings strongly supports the influence of knowledge on market

selection, which follows in line with arguments presented by Henisz (2003), stating that

knowledge concerning political instability, uncertainty, or corruption will prevent market

selection. SCAB exemplifies how their knowledge acquired from being active in a market

lowered their tolerance to political uncertainty, which can be explained by Johanson and

Vahlne’s (1977) and Garcia-Canal & Guillén’s (2008) reasoning that exposure to political

uncertainty generates experiential knowledge, which will influence the firms succeeding

market selection. The findings thus give clear support to argue that experiential knowledge

influences the firms’ internationalization process.

6.3 Choice of Entry mode The empirical finding shows that the institutional and political contexts influence the case

firms’ entry mode choice to a large extent. Due to the hardship of managing nation specific

healthcare systems and regulations, a lower resource mode, in form of licensing, is employed

by SCI, which follows in line with Maekelburger et al.’s (2012) research, highlighting that

SMEs within political salient industries are more likely to choose low commitment entry

modes as they are generally highly sensitive to external influences due to low error margins.

Such pattern becomes further salient in regards to GHPs venture into UAE. Given the large

perceived differences in the institutional environment, where the political risk was expected to

be higher, the firm lowered their resource commitment and entered the market via a

management contract rather than via Greenfield or acquisition, usually embraced in developed

markets. As suggested by Delios and Henizs (2003), one can thus assume that when

uncertainty about the policy environment is high, a significant amount of learning is required,

hence reducing the likelihood of high resource entry mode. The complexity of rules and

regulations in the health care sector as well as the uncertainty and political risk related to a

larger difference in the institutional context can thus, based on the above findings, be

reasoned to influence the firms to commit to a lower resource entry mode.


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However, an interesting finding concern the pattern of SCABs establishment in developing

markets, which contradicts the above reasoning. In markets where SCAB choses to invest,

they utilizes a JV in which they take a minority share in order to manage the institutional and

political context by tapping into local partners’ superior knowledge about their home market

context as well as get access to necessary political contacts. An explanation for this

phenomenon can be argued to stem from the nature of the industry, as such requires a strong

commitment due to strict regulations in order to increase the legitimacy (cf Garcia-Canal-&-

Guillén, 2008). Contrary to the above reasoning that complex regulations will influence a

lower resource commitment, the following findings indicate that it can be reasonable to

suggest that such could also influence to a higher resource commitment entry mode.

Nevertheless, even if the firms utilize different forms of entry modes the research indicates

that the institutional and political context directly impact their choice (cf Delios-&-Heinsz,

2003; Smith, 2004; Maekelburger et al., 2012).

While the influence of the institutional and political factor on the firms’ market entry mode

was observed in all the case firms, such factor does not sufficiently explain the higher

resource entry modes, normally utilized by two of the case firms, despite the limited error

margins and uncertainty in the political environment. Hence, there are indicators that other

factors also impact their choices.

An additional explanation for the case firms’ choice of entry mode can be argued to stem

from early international inception and high international orientation, which characterize the

firms, and has enabled them to generate considerable experiential knowledge in regards to

foreign market operations. This can be argued to reduce the perceived uncertainty, which

consequently affect choice of entry mode positively, much in line with the arguments

presented by Ripollés et al., (2012) and Blomstermo et al., (2004). Furthermore, the influence

of experiential knowledge also becomes evident in the case of SCI whom lowered the entry

mode commitment after learning from the hardship of operating a wholly owned subsidiary.

However, the influence of the factors in this case led to a choice of a lower resource mode, in

comparison to the other case firms, even if one can argue that the latter case firm share the

same characteristic in terms of early international inception and a high international

orientation. A possible explanation for this divergence can be argued to stem from the

influence of the nature of the service, where the knowledge intensity of the services provided

by both SCAB and GHP can be argued to require a local presence, hence demanding a higher


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resource commitment entry mode, in comparison to SCI (cf Eramilli, 1990). However, one

can argue that SCI differs as their service can be separated from the delivery, thus allowing

lower resource commitment. Hence, based on the above reasoning, the empirical evidence

indicates that it can be reasonable to suggest that experiential knowledge and the nature of the

service will influence the firms’ choice of entry mode.

Moreover, theory suggests that relationships with domestic associations as well as host

country embassies are beneficial for market entry, especially in regards to political salient

industries, as they can act as legitimate intermediaries for firms in order to establish necessary

relationships as well as provide vital market information (Henisz, 2003). In GHPs case, their

choice of entry mode was influenced by their relationship and information obtained from the

embassy in UAE, a relationship which was explained as highly beneficial in order to operate

and gain legitimacy in the market. An interesting contrast is seen in SCABs case, which rather

notes that being associated with a governmental body could raise suspicion with the potential

partner in the host country, a fact which they experienced in Ecuador. Thus, it could be argued

that the perceived notion of association with governmental actors as something positive might

vary among countries, and collaborations with government-related intermediaries might thus,

in contrast to suggested theory, rather hamper than facilitate market entry. However, one can

assume that this tendency is mostly relevant in conjunction with ventures into emerging

markets, which are commonly characterized by high political uncertainty and corruption (cf

Jansson, 2007).

Public-private partnership have emerged as an opportunity for market access within political

salient industries (Akintoy et al., 2008), and have been used as an entry mode by the case

companies. However, concurrently, the empirical findings indicate that the collaboration

might be a risky business if the governmental party breaches the contracts, or alters policies

which might influence the firms commercial activities in a negative way, as they, due to their

position, have a discretionary power over the firms (cf Figueria-de-Lemos, 2013). This fact

can be illustrated by SCAB in Egypt, which suffered from a breach of contract, and where

unable to solve the problem by negotiating with the government. One can thus argue that

involvement with governmental actors might deem risky in this sense, however still constitute

a necessity in order to be able to penetrate the highly regulated industry.


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Additional reflection Within the process-based view on internationalization, aspects such as market selection is not

seen as a strategic, rational choice (cf Johanson-&-Vahlne, 1977; McDougal, 1991; Ellis,

2000). However, the empirical findings indicate that all three case companies emphasize the

choice of market selection and entry mode as based on strategic considerations to a large

extent. SCAB, which explicitly state that they have learned throughout the process that they

need to have a more strategic approach, and not enter markets that are associated with high

political risk. One can argue that the characteristic of the industry and the complexity

surrounding the nation specific healthcare systems are underlying reasons for the emphasized

strategic reasoning. Contrastingly, the empirical findings indicate that the nature of the

political salient industry makes it difficult, if not impossible to make rational decision and

choices based on a strategic analysis. This can be exemplified by the case of GHP, which

have been forced to exit several countries when unexpected political decisions were taken

over night and thus altered their whole business, which forced them to exit the market.


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7. CONCLUSION The following section will provide conclusions that have been drawn from the analysis in

order to answer our stipulated research questions; How does Swedish SME medical service

providers internationalize? What factors influence how – and in what way – the process

unfolds? Moreover, in the light of the concluding remarks, the conceptual model is refined.

7.1 Concluding Remarks The research shows that knowledge, network and the institutional context influences how the

internationalization process of medical service SME providers’ unfolds to a large extent.

Findings reveal that factors influencing motives for internationalization stem from the

institutional and political context in the home market, as well as abroad, in combination with

the founders and managers previous knowledge and established network relationships, which

works as catalysts for international ventures. A vital aspect highlighted in the findings was the

institutional context and the political dimension in the home market, as the healthcare system

and related policies and regulations was regarded as unfavorable. Even if the tendencies are

somewhat changing to private firms favor, the structure of the system, with high inclusion of

public providers, fragmented public procurement systems and changing policies, causes

uncertainty. The unfavorable conditions can therefore be argued to constitute a vital barrier

for SMEs to generate economic muscles and grow. However, the same conditions can also be

viewed as triggers, as the limited opportunities, and to a certain extent, solicited demand,

drive firms to expand internationally from inception in order to prosper. Hence, having an

understanding of the home market and its structure is important in order to understand the

prerequisite for the firms aiming to venture abroad within the health care service sector. Thus,

acknowledging that the element of political context should include both home and host

market context, the conceptual model has been revised in order to further clarify such

influence on the process. The institutional and political context factor influence how the process unfolds. The firms’

market selection is influenced by the perceived degree of political uncertainty, the health

systems structure and finance, as well as rules and regulations such as licensing approval. A

higher degree of uncertainty and restrictions deter markets that would otherwise be

considered. However, a higher degree of favorable institutional conditions, such as a large

private market and a functioning reimbursement system, could encourage market selection.

Moreover, even if the firms embrace difference forms of entry modes, the research concludes


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that the institutional and political context directly impacts the entry mode, either by

influencing towards a higher resource commitment in order to manage the institutional and

political environment by tapping into local partners knowledge, -or lowering the resource

commitment, due to hardships of managing nation specific healthcare systems and regulations

as well as policy uncertainty. Furthermore, public-private partnerships have emerged as an

opportunity for market access within the political salient industry, as illustrated by the

findings. Although involvement with governmental actors might deem risky, due to their

discretionary power, it still constitutes a pivotal entry mode in the heavily regulated health

care industry.

The network factors influence how the process unfolds, as demand abroad, either through

previously established network contacts, or unsolicited enquiries, illustrates the firms’ market

selection. The research also concludes that the partners’ origin as well as international public

procurement projects influences and dictates the firms’ market selection. An additional

conclusion can be drawn that networks influence the firms choice of entry mode.

Interestingly, the findings also imply that the association with governmental network partners

in conjunction with market entry might not always be perceived as legitimizing in certain

markets, but might rather hamper than facilitate market entry.

The knowledge factor impacts how the process unfolds, as experiential knowledge, stemming

from being active in a market, impacts the firms’ market selection in its succeeding

internationalization. Moreover, research conclude that the early international inception and

consequently a high international orientation have enabled the firms to generate considerable

experience in foreign market operations, which lowers perceived uncertainty, hence

influencing the choice of higher resource modes positively. However, accumulated

experiential knowledge stemming from institutional differences and experienced policy

uncertainty can also influence a lower resource commitment mode.

Although it can be concluded that institutional context, as well as networks and knowledge,

influences the firms’ internationalization, the research findings reveal that the nature of the

service provided constitute yet another vital influential factor in regards to how the process

unfolds. The more advanced knowledge offered, such as tertiary care, combined with a low-

equity commitment, which does not entail financial and juridical risks, enables an opportunity

to exploit a high demand from institutionally different markets with a larger knowledge gap,


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such as emerging markets. Concurrently, health care services, which require a high resource

commitment entry mode due to the services requisite of market presence, will favor

institutionally similar markets in order to reduce uncertainties and risks stemming from nation

specific health care systems. Additionally, if knowledge regarding the health care service is

scarce, such as elderly care in emerging markets, markets with low institutional difference,

where the industry is mature and thus an understanding of the service is established, will be

favored. Thus, the nature of the service should be acknowledged as an additional key

influential factor in our revised conceptual model, which is presented below.

Figure 3. The revised conceptual model (authors own)


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7.2 Academic & Practical Contribution This thesis has contributed to an extension of the established literature on SME

internationalization by illustrating that network- and process-theory are inadequate to

sufficiently explain vital factors influencing firms’ internationalization processes. By adding

research from the institutionalism field, this paper contributes by showing that knowledge,

network and the institutional context and political dimension together, in a more

comprehensive way, can explain how firms within political salient industries in general, and

in the healthcare industry in particular, internationalizes and what factors influences the

process. Moreover, the revised model further contributes to enhanced understanding of the

phenomenon by highlighting the importance of the institutional context in the home market as

a pivotal factor, which to our knowledge has been overviewed in regards to firms’

international venture. In addition, the nature of the service has been concluded to play a

critical part in the SMEs decisions of how and in what way they internationalize, and should

thus be further acknowledged as a key influential factor in their internationalization process.

By providing rich intra-firm empirical data within this unique and newly emerged context, the

thesis contributes to closing the research gap, which has been highlighted by several authors

in conjunction with internationalization of healthcare service firms.

Based on the research findings, important practical contributions in terms of suggestions to

export promotion agencies and governmental trade support organizations can be disclosed.

Given the differing healthcare systems across nations with diverse degrees of privatization

and structures for reimbursement, frequent updates concerning structural or governmental

changes and industry outlooks would constitute valuable information for firms within the

industry. Furthermore, the vast array of international procurement contracts available is

argued to be both time-consuming and difficult for each individual SME to identify.

Therefore, it can be suggested that such contracts can be identified and organized within the

agencies in order to further support and facilitate international opportunities for SMEs.

Moreover, by analyzing what factors influences Swedish medical service SMEs during the

internationalization process, vital managerial implications can be highlighted. When venturing

abroad within this political salient industry, managers should focus on building relationships

with local partners. Having a trustworthy local partner whom holds fundamental information

and insight into the institutional and political context, becomes a key factor in regards to

managing political and policy uncertainty. This aspect becomes even more vital in regards to

ventures into emerging markets, due to heightened corruption and political turbulence risks.


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However, it should be acknowledged that developing markets offers a great commercial

market for healthcare firms and opportunities to exploit first mover advantages. Still, as the

healthcare systems in developing countries are often immature, managers should be aware and

prepared to outline strategies in regards to “educate the market” in order to achieve

continuous growth in these markets.

7.3 Limitations & Suggestions for Future Research As the very nature of this thesis has been to enhance the understanding of how Swedish SMEs

internationalize and what factors influences the process, the framework and empirical findings

have been constructed to incorporate multiple factors in order to be as comprehensible as

possible. However, although this mirrors the purpose of our paper, the extensiveness of factors

brings limitations in studying the variables relation to each other. Further studies could be

fruitful to depict the interrelation between the factors and, if possible, quantitatively test and

measure the correlation by stipulating hypotheses.

Moreover, throughout the course of the research, an interesting aspect has been identified but

not sufficiently dealt with and hence, constitute an important suggestion for future research.

This aspect is related to firms’ strategic decision making and planning, which was identified

as a common characteristic across the case firms. As mentioned previously, a strategic,

rational approach might arguably be necessary in order to manage the political and policy

uncertainty surrounding the healthcare industry, but might however deem extensively difficult

due to unexpected shifting policies. Hence, how managers in healthcare firms design

strategies manage the turbulent environment would be a fruitful future research to undertake,

which would contribute to an enhanced understanding of the complexity for the firms within

this industry.

i

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APPENDIX: INTERVJU GUIDE

PART A – BACKGROUND QUESTIONS

1. What year were the company established and how many employees are there currently? 2. Can you please explain what services and/or products the company provides? 3. Can you please start by describing your role and position at the company? 4. What are your main responsibilities and tasks? 5. Who are your main customers and how do you approach them? 6. Can you explain how the firm gets compensated for provided services? (eg.

reimbursement) PART B – THE INITIAL INTERNATIONALIZATION PROCESS

1. Could you please begin by clarifying which markets you are present today?

2. When did you first venture internationally?

3. Can you describe the reasoning/rationale behind the decision to first internationalize?

4. Where there any triggering/motivate factors that initiated the process, and if so, can you describe what they were and how they affected your decision?

5a. Where there any critical barriers that were identified and/or experienced in the initial phases of the internationalization? If so, could you explain what they were and how they affected your initiated decision to internationalize?

5b. Where there any industry specific barriers that you encountered, and if so, could you please elaborate on how they affected you and how they were managed?

6. Can you please describe (if there were any) facilitating aspects, which enabled the internationalization?

7a. What was your first international market?

7b. Can you explain the reasoning behind the choice of market and which factors that influenced your choice?

7d. What opportunities did you identify on the chosen market?

7e. What barriers or hinders did you encounter when entering into this market? How were these managed? 8a. Please describe your choice of entry mode when entering into the market. Can you elaborate on the reasoning behind the particular entry mode chosen?

9a. Have you utilized any partners or contacts on the chosen market?

9b. If so, an you please describe the rationale behind choosing such partner?

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9c. How was the partnership initiated? How was contact established?

9d. What was the motives behind choosing to use a partner?

10a. Where there any collaborations with governmental or other political actors?

10b. If yes, can you please elaborate further on how such relationship was initiated, how it unfolded, and what it has looked like?

10c. Please describe the role and importance of such relationship. What influence has it had on the process?

11a. Where you required to obtain any specific licenses, certificates, approvals or fulfill any other type of criteria stipulated by governmental and political host market actors?

11b. If so, can you please elaborate on what types, how they were acquired, what was required and how they influenced the process?

12. Have you applied for/been granted any types of government funding (either from home government or host government), assistance or other support from governmental or semi-governmental organizations? If yes, on what premises where you granted such?

PART C – THE CONTINUED INTERNATIONALIZATION PROCESS

1. Can you please describe how the continued internationalization process has unfolded since your first international venture?

2a. What markets did you internationalize to and why? Please elaborate.

2b. In what way has the structure of the health care system influenced your choice of market selection?

3. How has your previous international market experience influenced your market selection?

4a. Have you employed the same, or similar, entry modes into the succeeding international markets?

4b. If not, please elaborate further on what influenced your decision to employ a different entry mode.

5a. Has your previous contacts and relationships influenced your continued internationalization? Please describe how and in what way.

5b. How have you identified your potential partners for continuous markets?

5c. Please elaborate on how this process has unfolded. How have you established contact with such partners? How has the relationship developed? How have you entered their networks? What are important aspects to consider?

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6. Were you able to benefit from the experience of your previous market entry? If so, please describe how and in what way.

7a. What industry specific factors are particularly relevant to take into consideration when venturing abroad?

7b. Could you please describe the biggest challenges for your internationalization within the industry?

8a. Could you please describe the process to venture into emerging markets vis-à-vis more developed markets?

8b. In what way did the process differ?

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